Managing money is all about prioritising. This is the case for any lifestyle, and no matter how much or how little your income is. Apparently, it all boils down to The Micawber Principle. Those who are familiar with Mr Micawber, the character from Dickens’s novel ‘David Copperfield,’ will also be aware of his observation from which the principle derives:
“Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”
No one can argue with this – rich or poor. You must live within the level of income you receive, and manage your money wisely if you wish to stay out of debt. Moreover, it also demonstrates financial skill when you are able to successfully avoid the proverbial sleepless nights that being in debt will inevitably cause.
Many folk seem to possess a natural affinity for managing money responsibly while others, often by their own admission, are hopeless. It is arguable that more emphasis be placed on financial planning and management in schools with a degree of input from parents. This way, earlier on in life in there is a good foundation established for properly managing future earning potential.
Don’t be one of those people who never prioritise. As soon as any amount of money becomes available to them, they fail to use it wisely and before they know it – it’s gone and they have nothing to show for it.
Priority expenditure means settling those bills that have to be paid each month without fail so you can meet the obligations you’ve signed up for.
Mortgage and home rental payments must come first above all else. If you have no roof over your head, then what use is anything else? Added to these outgoings are utility bills and other regular payments that need to be paid to enable the smooth running of your household. These have to be settled on time and on a regular date convenient to you.
Set up direct debits
You will need to set up direct debits to go out from the main personal account into which your pay check goes in on the day after it arrives as this is always the most efficient way to manage your income and expenditure. Only then when all your monthly monetary obligations have been met can you take a look at what is left and decide what to spend it on.
Invest in your future
Even then you must be discerning and not overly liberal in your attitude to money, you have earned it. Do not waste or fritter it away money, when you could put it to far better use by investing in your own future and financial progress.
People often go wrong by not effectively taking charge of their income because they choose to spend it on unnecessary items or even luxuries first. This leaves them with nothing for the essentials. How often do you read of doting parents who overspend on Christmas presents and then have nothing left to put food on the table come New Year? As well as prioritising, you must think ahead and not take the chance that “something will turn up”.
It may not be easy for you to manage your money wisely if you have not done so previously, but you can soon get used to more disciplined habits by keeping a written record of all income and expenditures.
You don’t have to be like Scrooge, another of Dickens’s well known characters, but if you’re careful with your money you will soon find you can meet your obligations and perhaps even save a little for a long deserved vacation.