The Art of Personal Finances

Money is not the key to happiness. However, financial control and independence are. Learning to handle your finances in a responsible manner can affect your lifestyle, relationships and even your self-perception, once you get past the fear of the 'unknown'.

We all know the story of the frivolous grasshopper and the frugal ant, and the moral tends to apply to financial matters as well. However, it does not mean you have to be mechanical about your spending – that is, to save, save, save and cut your costs down to a point where you don't get to enjoy your life, or buy the odd item or take-out from time to time. Knowing how to manage your money - when to save, where to spend, how to invest – can sound daunting when it is surrounded in a cloud of jargon. However, the greatest obstacle to overcome is simply a matter of developing an assertive mindset when it comes to your personal finances. Once you pick up a set of everyday skills, the jargon ceases to baffle you!

Learn to see your personal financial success as an ongoing life-long process. Awareness plays a huge, huge part in this. And not just that you are mildly aware that you have very little money or that you may have spent a bit too much this month. How much is in your account? What did you spend it on? What do you owe at this moment? Answering these questions honestly for yourself is 50% of the work you need to build your financial success, truly!

A huge personal debt, or looming bills – they can really hang over you like heavy clouds. But just like you have to lay a foundation brick by brick before you build a house, you can break up large financial challenges into smaller steps that you can practice day by day. Little by little, you build up your knowledge and good habits until you find yourself under a sturdy roof that means you no longer need to be afraid of any clouds.

The second key to personal financial success is a balance between a long-term discipline, and not depriving yourself in a detrimental way or panicking if a budget doesn't go according to plan and you end up overspending. It's okay. It happens. It means that next month (or over the next couple of months, depending on how large your financial issues are), you would have to rein in any discretionary spendings. But overall, remember that money is paper. You can control this stack of papers and not let it rule your life or send you into a cold sweat.

Educate yourself on money matters. Do it for yourself. Perhaps you have a partner, friend or relative who is a whiz at these matters. Perhaps you are waiting for someone to swoop down and fix your financial problems, or take these matters off your hands. Get rid of this notion as a favour to yourself. No matter what situation arises in life, you need to be first and foremost self-reliant, to be able to comprehend and address these issues yourself. This does not mean you have to isolate yourself, or that you can't ask for help. Nonetheless, if you educate yourself on personal finances, you will be able to stay afloat in almost every situation life brings you.

And how liberating to take control over your finances! You know where the money you've earned is going, you answer to no one but yourself, and you have a large part of an otherwise uncertain future in your hands with just a few adjustments practised daily. This power is surely worth every penny in the world!

One final piece of advice, before I share with you some tips you can implement today to get your financial future back into your hands. Please do not be ashamed when you take the important step to assess your current financial standing. Perhaps you may have spent a lot of money in your past, and not always on useful things. Perhaps you are perpetually behind on your payments and no longer open your mail in fear of angry-looking red notifications. Shame cripples your ability to take control. And every day that you wake up, you are granted with the powerful ability to change your past and change your future. Every little action you take every day changes your fate, one bit at a time. So give yourself the opportunity to change your financial position and know that many major problems can be overcome with discipline and planning. So no shame please, you can do this!

Check your balance

Go on. Check your current balance. See how much you have and make a note of it. Remember, 50% of your personal financial success lies in awareness and assessment of your current situation.

Estimate the money you have and what you need to spend on expenses

If you have just received your salary, set aside the money you need to pay off your essential expenses - rent, utilities, transport etc. Pay it off promptly. You can even set up an automatic standing order once you get your salary to get the basic bills out of the way.

Make a list of any outstanding debt payments you have

Is it a small debt you can afford to pay off this month? Or is it much larger and will require monthly cutbacks in order to pay off? Personal debts, such as credit card or consumer loans can build up and escalate quite quickly, so work on paying these off as soon as you can. Set the amount of money aside that you can reasonably contribute this month and start clamping down on debt!

Adjust your food and entertainment budget accordingly

Perhaps this month you don't have so much to pay off – that is great! A rough guide to breaking down your monthly salary is roughly 50 – 30 – 20, the 50% allocated to essential expenses and food, 30% dedicated to financial priorities (loans, savings, retirement fund, debt payments) and 20% remaining for lifestyle expenses such as shopping, dining out, clothing and so forth. Modify this ratio to suit your personal needs, and re-evaluate it every month.

Put any loose change into a jar

It's no joke - go and dig up your loose change from pockets, bags and wallet, and put them into a jar! Make a habit of putting any small loose change you have in there. Whilst in the beginning it doesn't seem like much, the pennies pile up over time. You can then take your pennies to the bank and cash in!

Trace your prior expenses

Whether you download an app, create an Excel spreadsheet or note it down manually, keep a track of every expense you make – big or small. As you create the habit of tracking your expenses, you will be able to see trends and patterns emerge over time. By seeing where you tend to overspend, you can consciously begin to trim the unnecessary spendings, and get an overall view of your expenditures.

Withdraw your weekly budget in cash

And try not to pay by card when you do your shopping, or go to the ATM for an additional tenner. Once you have allocated a weekly budget, stick to it. Paying by cash will also serve as a tangible and visual reminder of the fact that you have a set budget to work with, thus discouraging any impulsive splurges. Better yet, set yourself a daily limit and see how creative you can get with that!

Empower yourself by getting financially educated

There are many informative resources to get yourself savvy. From browsing Internet sites such as Money Saving Expert (www.moneysavingexpert.com) , to checking out a couple of library books on the matter (The Complete Idiot's Guide to Personal Finance in Your 20s & 30s), everything you need to get you started is right there for you. Start with the basics on personal financing, and gradually build your financial vocabulary and you will see that there is very little to frighten you when it comes to your money matters.

Set up a bill payment calendar

Whether electronic or on paper, have it somewhere in plain view. Input all your bill expenses and their due dates, as well as the date when you expect to receive income. By seeing when your account gets credited, you know what to expect when you see your bank balance and can therefore plan accordingly.

Open a savings account

It is never too early to start saving, and there is no minimum amount when it comes to savings. How much you choose to save will vary throughout your life – sometimes it may be as little as a twenty, sometimes you will be able to stash away up to five hundred a month. You can certainly set a savings goal and take it off your salary along with your bills, but always re-evaluate what is possible. Once you pinpoint any unnecessary and extravagant spendings, you can add the money you saved into your account and leave it there. By keeping your savings and your expendable money separate, you won't end up dipping into your hard-earned savings in a moment of impulse.

Do your research on credit cards

Shop around for the best deal and get information on the bank card that best fits your needs. Pick a card that ideally has no annual fees, and stick to two credit cards at most, if you must. This way you will avoid racking up unnecessary debt. In addition, do not max out your cards and go into overdraft, even if you can pay it off next month. Credit card debt and consumer loans are notoriously tricky and can take much longer than calculated to fully clear. Find the card that is right for you, do not be shy to take a contract home and read the fine print carefully before you sign it.

These are some ideas you can implement as soon as Monday comes around. They are simple, and their implementation requires a bit of discipline and clear goals in mind. But once you get into the habit of evaluating yourself and your financial status, I can promise you that with every step you will feel more powerful, more in control of your life. From dependency on people or things, from the fear of money (or its lack) – contrary to the notion that you will be chained to your budget book counting pennies, you will actually feel more liberated to make decisions that suit your life and your needs best!