6 Steps to Sound Financial Management

Sound financial management is key to anyone's success.  If you can't look after your money then what hope is there for everything else?  The same of course goes for small and large businesses and whole countries too, it's just the scale that's way different.

Step 1 – Set A Target

Determine just what your own financial target is.  It might be becoming completely debt free, paying off your mortgage or other significant loan or anything else.  Whatever it is, it has to be so important to you that you will do whatever it takes to make it happen.

Step 2 – Plan Your Timetable

Set out a timetable with the end point being the successful arrival at your financial goal.  This might be a matter of months or a few years.  Best to keep it within sight, say no more than 3 years max.  Break down your timetable into regular periods against which you can measure success. 

Step 3 – Calculate Your Outgoings

Work out your regular outgoings both in terms of weekly, monthly and yearly payments and compare that with what you earn.  This might be more difficult than you think but aim to get it as accurate as you can and don't be tempted to miss out all those one-off payments - they all add up.

Step 4 – Calculate Monthly Repayment

Divide what you want to pay off by the number of months you aim to take to get rid of that debt to work out how much you need to find each month.

Step 5 – What Can You Sell

Look about you, both physically and financially and see what's available that could be sold right now that would not adversely impact your life (too much) but would give you a quick return and could pay down a significant chunk of that debt.  For estimation purposes take off what you think you could get and re-calculate your monthly pay-back figure (don't be too optimistic about what you might get, be realistic).  Of course, once you've made the sales you can re-calculate with the real figures.

Step 6 – Use A Red Pen

Take a red pen and cross out all those luxuries and unnecessary items in your list from Step 3.  Now, take your red pen and see how you can reduce your 'necessary' spending by an overall percentage.  This could be 25% or 40% or whatever fits your calculations.  The figure you need to aim at ought to be high to force you to push for it, anyone can trim 5 or 10% without really thinking about it.

Keep to your timetable and keep re-freshing your calculations along the way.  Who knows, you might be able to beat your timetable - now that would be good wouldn't it?

Spend a little time to save a lot of money!