The beginning of February is always a tricky time financially. On the one hand, you are breathing a sigh of relief that you’ve somehow survived what is always the longest and most challenging month of the year. But on the other, the end of the tax year is looming, bringing with it a whole new set of challenges, particularly for those who are self-employed.
Doing a financial review might be somewhere on a level with root canal work in your “fun ways to spend an afternoon” list, but the point is that understanding your personal finance is the first step towards mastering it. So step on up, and let’s get on top of it once and for all.
Check What You’ve Got
You would be amazed at how many people are not fully aware of their own assets. Do a stock take on your bank balance, savings and investments. Where the latter are concerned, we tend to pick up bits and pieces over the years, so be clear about the value of all assets and also the yield. If you are not making full use of your tax-free allowance, you are throwing money away, so take a look at these low cost investments from Wealthify and make sure you are investing in the most cost-effective fashion.
Assess Your Income
If you are in paid employment, this is relatively simple. For freelancers or business owners, it can be more of a challenge. As well as earnings or salary, make sure you include any dividends, benefits or other sources of income you might have. If your income is low, you are not in regular work or you have young kids, this is the perfect moment to check whether there are additional sources of income to which you are entitled but that you have been missing out on. Remember, if you do not ask, nobody will bring it round to your house on a silver tray.
Review Your Spending
You start with what you have, then look at what is coming in, so the logical next step is to examine your outgoings. If you mostly use your card for payments, then studying your bank statement over the past month can be a real eye-opener. Try logging each item on a spreadsheet under specific categories. This is when you suddenly realise just how much those “occasional coffees” in your favourite high street outlet can mount up. If you tend to spend cash, you’ll need to keep track as you go, but make an effort to do it, and be honest with yourself.
Put The Pieces Together
The above three steps give you all the information you need to make a real difference to your finances. These will help ensure you are on the right side of Charles Dickens’ famous equation for happiness. If you are not, you will have the information in front of you to see where you can reduce expenses, at least in the short-term. And if you are, you have a clear picture of how much more you can realistically look to invest for a financially stable future.
Disclosure: This is a collaborative post, see our disclosure policy for more information.