Who is in Control? You or Your Money
By Derek Beese
This may seem to be a very silly question but do you ever wonder at the end of the week where all your money went and left you with nothing? Many people do just that and it usually means that the money is in control. There is no plan and the money says “here I am, spend me on whatever takes your fancy”. There is a very old saying that “money burns a hole in his pocket” which is another way of saying that the money is in control!
This is a difficult thing to correct and for some people are almost impossible because they just will not admit that they are not in control themselves and until this fact is admitted to oneself, the cure cannot begin.
The cure is simple to say but often very hard to apply because it means that you have to make a set of rules and stick to them. In time they become second nature and the more you stick to them the easier they become because they become a habit.
What are these rules that give you the control over money?
First you have to make a plan – usually called a budget by financial people. The Government makes an annual budget and all businesses make annual budgets and all charities make annual budgets and everyone who has to deal with money on a professional basis makes a budget. This is the first essential step to being in control of money. In simple words, it is their Plan for the year ahead. The estimate of what they are going to receive and how much they can spend and how much they have to put aside to meet unforeseen events. So rule one is make yourself a plan.
Rule two is to make sure that this plan sets aside a small amount of money which will not be spent – a regular amount. You decide how much because the plan is yours but those who are best at this try for about £5 out of every £100. This in financial jargon is five percent (5%). The word percent comes from the Latin Per Centum which means “for every hundred” so five percent means five for every hundred. If your income is two hundred then 5% percent is 2×5=10. If three hundred then 3×5=15.
Rule three is to open a savings account with a building society or the post office which is easy to do. Just go in and ask and they will lead you through the procedure. Make it one which has a branch office which you pass every week. Then rule three says that every week when you pass this office you go in and deposit your planned amount and leave it in the account. It is still your money but do not draw it back out. Try to make it the same day every week so that it becomes a habit to go in there for that purpose. Do not put it in a jam jar or a box for two reasons. One is that this makes it too easy to “borrow” and is a temptation that breaks rule two and the second is that money saved should be made to work for you. All the time it is in the savings account it will earn interest for you and if it stays untouched it will slowly grow larger without any action by you.
By the magic of compound interest the more that is in the account and the longer it is left untouched the faster it grows. In a building society there is no charge for this and your money is guaranteed safe by the Government up to £50,000.
Rule four is to stick to your plan.
Then you can say that you are in control of your money and your money does not control you.
By Russell Beese
Tags: control your money, financial bedget, how money works, how people make money, how to save money
Money Matters | Derek Beese December 9, 2008
