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Thursday 1 December 2011

Taking control – putting money management into action

For my final blog on money management I want to share ideas on how all of this can be put into action. Whether we are Financial Planners or not we need to be aware of what is happening around us and in many cases as I have evidenced Financial Planners do know.

We can shrug off money management as a fad but there has been plenty of comment in recent days about the average level of debt in the UK – the average debt per adult in the UK (including mortgages) is £29,539. The interest repayments on personal debt were £63.5 bn in the last twelve months and so I could go on! (Read more…...)

As I constantly say if individuals are not in control of their day to day finances then financial planning is a world away. And we all know this problem is only going to get worse if we don’t tackle it head on.

I summarise money management as:
  1. Know what your monthly expenses (and income) are, and know when these come in and out
  2. Have only one bank account – see my comments below on this
  3.  Pay down debt as quickly as possible, seek advice if necessary
  4.  Build up a safety net
  5.  If you have a credit card, then use it as a debit card
  6. And finally once in control you can then focus on financial planning
Money management in action

Once you know what your income and expenses are then you can start to manage your money. Often couples have separate accounts and possible a joint account. For this to work I believe you should have one bank account. One charity states that if you owe money to a bank don’t pay money into this account; so set up a brand new account.

How we approach this:
  1. We set an account with one bank but have two savings accounts attached to the account
  2. Where possible all regular payments are switched to monthly payments so we know when they are going out
  3.  All incomings whether weekly, fortnightly or monthly are counted as monthly
  4. The monthly direct debits / standing orders and incoming money all goes into the main account
  5. If money comes in, in one go, then this is easy to manage because you can switch money to the two savings accounts at that time – the first account is for irregular payments like Christmas, birthdays, car maintenance etc and the second is for the weekly expenses
  6. Where money is spread then it is a little trickier but how we recommend people approach this is to ensure money is in the main account first to cover bills, then food and finally irregular payments. If you have spare cash then you can sub the accounts to get this working
  7. Each week, cash is withdrawn for weekly expenses – so food, fuel etc is paid for by cash. Once the money is gone it is gone
  8. Initially this is hard to adjust to but in time it becomes easier to manage and almost certainly people start to be able to save more
  9.  If you have debts then don’t try and take out more debt, and more importantly stick to the budget. If you have a credit card, which we have then use it purely as a debit card i.e. if you are paying for a car repair bill then you use your card to pay for this and then take money from the savings account to pay the card down
  10. And finally review this constantly and stay on top of it
I mentioned previously that I didn’t think Financial Planners could really help with this, and I still believe this. However, I believe the role of a Financial Planner is one of a lifetime relationship with the aim of achieving goals. This means that on some occasions Financial Planners may help clients in circumstances which would not fall under their area of specialism, I have known Financial Planners to help clients who have had to go to court for minor offences and have helped them with debt issues so it is a case of looking outside of the box which many people do.

My next set of blogs will explore the concepts around financial planning and what I mean by this. I have seen a lot debate about charges / fees and products v planning so I want to touch on that first and then build from there.  

Just for information two charities I have looked at around debt are:


If you know others then please provide details.

And remember this is a financial revolution aimining to change a mindset that covers financial management, financial planning and finally investing. If we are succesful and can go to schools, colleges and universities then we will have made a difference. So please help to spread the message.

Follow me on Twitter so please spread the word and lets change the world.

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