By Navigate Financial Group

It has been something our parents have tried to instill in us from a young age, try and save a portion of everything you make for a rainy day as you never know when you might need it.
From generation to generation, we either seem to be extremely efficient of making the most of our money, paying down debts quickly and  having a growing cash reserve or on the other hand, fighting the constant battle of reaching your financial goals with the income you have.

Time seems to be the key component of success with running and maintaining a budget as it involves firstly having an understanding of where your money is going, setting targets for what you aim to spend in each area of your finances and looking to review it monthly to ensure you are on track- who really has the time these days? We all lead busy lives filled with work commitments, growing families and other responsibilities, it seems much easier just to let things plod along and accept that this may be as good as it gets.

The good news is there is a solution to the problem; we as human beings are creatures of habit and without structure we tend to assume the easiest route possible. So how do we create a structure that allows us to create new habits, maintain an accurate and efficient budget without having to spend too much time trying to keep track of it?

1) Complete an honest budget

This step is unfortunately unavoidable- as the saying goes, “those who don’t study history are doomed to repeat it”. It is important to clearly understand where your money is going, what component goes to fixed expenses such as your home loan, groceries etc, what goes to discretionary spending and define a target for your surplus income each month.

2) Allocate yourself an allowance

This step may seem juvenile but it is critical to have control of your directional spending as most of your bad habits are likely to stem from your day to day spending. Work out how much you need per week for your lunches and coffee, eating out, entertainment and other ad-hoc costs and make a call on whether you need to tighten your belt on some of these expenses when they are added into the budget. This directional spending is what plays the biggest part on your surplus money so be honest with what you need and try and stick to it.

3) Partition your money

Most people tend to have their income paid into the same transaction account that is linked to their debit card, have setup all of their direct debits from this account, along with taking out cash throughout the week it becomes a nightmare to know exactly where your money is going. Consider having a hub account that isn’t linked to a card which manages your direct debits and transfer yourself enough money to your everyday account to fund your directional spending. This allows you to get a clear indication of whether you are overspending and will force you to analyse your day to day expenses.

4) Track your progress

Keeping motivated and understanding your progress is key to achieving your cash-flow goals which are the centre of all of your future financial decisions. Try and evaluate how quickly you are working to pay down debts or save towards a financial goal which will help you push harder to reach the finish line.

Accountability and creating an efficient process are the most important aspects of your cash-flow management. We have developed a number of solutions that not only provide you with the best way to facilitate the management of your money but also allows us to operate like your personal CFO to provide you with on-track management towards your goals and reporting to give you insight into your progress.

If you want more information around our cash-flow management solutions please contact us to discuss it further.

Categories: Insights