Managing Money
Jul. 17th, 2009 01:41 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
ailbheSome people are good at it, some people are ok as long as there's plenty of money, and some people are dreadful at it. I have never really worked out what makes people so. I know people from poor backgrounds and wealthy backgrounds in all categories, as well as people from varying degrees of comfortable backgrounds.
Some people seem to learn to manage money by living in fear of poverty (raises hand) and some people seem to learn by good example (raises hand) and some people seem to learn by being involved in the financial planning and management of their families as they grow up (like good example but more hands-on) (raises hand again) and most people probably have some combination of all three going on.
But the part I can't work out is what makes people who know what bad management does, up to a point (a point between stress and hunger, say) nonetheless continue to manage badly. What do Groups A, B and C learn which group D can't seem to? Let's not assume that group D are delusional, or want to rely on other people in their lives to pick up the pieces - let's assume that their desire and intention is to be able to spend only 252 pence in the guinea and not forever hanker after the half-a-crown that isn't there.
Some people seem to learn to manage money by living in fear of poverty (raises hand) and some people seem to learn by good example (raises hand) and some people seem to learn by being involved in the financial planning and management of their families as they grow up (like good example but more hands-on) (raises hand again) and most people probably have some combination of all three going on.
But the part I can't work out is what makes people who know what bad management does, up to a point (a point between stress and hunger, say) nonetheless continue to manage badly. What do Groups A, B and C learn which group D can't seem to? Let's not assume that group D are delusional, or want to rely on other people in their lives to pick up the pieces - let's assume that their desire and intention is to be able to spend only 252 pence in the guinea and not forever hanker after the half-a-crown that isn't there.
![[identity profile]](https://www.dreamwidth.org/img/silk/identity/openid.png){kind=small}
(no subject)
Date: 2009-07-17 05:20 pm (UTC)Herewith, Step One:
- Print out your last 6 bank statements. If you've had a very unsettled year (job loss, large expenses like buying a house, moving in with somebody and your spending habits changing suddenly), make that 12.
- Go down the list of debit items in each statement and identify some basic categories. Examples: rent, utility bills, supermarket bills, transport/fuel costs, random cash taken out of cash machine, clothies/books/CDs/other "shopping".
- Carefully add up exactly how much money you have spent on each category each month. This is best done by typing the figures into an Excel spreadsheet.
- Calculate an average per category across all months. This is how much you spend. Added up, these averages are your average monthly outgoings.
- Do the same excercise on the credit side. If the average debit is larger than the average credit, you have a problem that needs addressing.
If the average debit is smaller than the average debit but you are still overdrawn or otherwise in debt, you are doing one of two things: a) leaving shit out, or b) farming it out to credit cards. Start again, this time taking ALL of your expenses into account.
Once you've done this exercise honestly and are sure that you know exactly how much you spend and earn each month, budgeting is a doddle - it's just a case of making sure the former fits into the latter.