Taking stock of your finances

We all dream. Whether it's of a debt-free future or having enough in savings to buy what we really want, dreams can become reality – if we are prepared to take stock of our own finances. In order to do this, we need to know precisely how and where our money is being spent – every last penny of it – then formulate a positive plan of action to live within our means.
Are you cost conscious or are you a blind spender who stops only when you've run out of credit? Do you know your current financial situation? Assessing current state of affairs is something that needs to be done in a meticulous and business-like manner. Clearing debt and saving for the future is a long-term commitment, so it is best adding an element of fun to proceedings, right from the start. By challenging ourselves to several short-term goals, we prove to ourselves that long-term success is within our grasp.
I find it's best to start with the general household budget as a whole. Comparing how much money is coming in with how much is actually being spent can be a real eye-opener. It is something many people dread, therefore avoid doing. Only by deducting all our expenses from our overall income can we reveal the starting point for any big money saving adventure. Shocking or not, we need to be absolutely honest with ourselves when it comes to budgeting.
Although some regular out-goings are fixed, like rent or mortgage payments, taxes and standing charges, others offer a bit more flexibility if we're prepared to shop around and compare prices. Do you ever question monthly out-goings? If you have a positive bank balance, that is great! You can start working out how to increase savings. However, if you have a negative balance, it is time to slash spending in ways that take you out of the red and back to the black.
Never underestimate the power of prioritized spending, as this, alone, can save you a small fortune. List all your essential outgoings for the year and then incorporate everything else, prioritizing from needs down to mere wants. Understanding the difference between these two is paramount to your success – we need food, water and a safe place to live, we may even need our own mode of transport for traveling to work, but we want designer labels, holidays and sports cars.

Once you have formulated your plan, activate it as soon as possible by keeping a record of any progress made. Taking total control of your spending can be empowering and give you the push you need to make important changes. Think before you spend – how will a particular purchase impact on your overall budget? Can you afford it? Is there discount available? Better still, can you borrow it for free? You'll soon be spotting where savings can be made and extra income can be generated. It pays to keep tabs on your finances.
Author bio: Patrick Naylor is a freelance writer, journalist and editor. Saving money and spending wisely are some of his obsessions. He likes to share his experience on frugal living, debt management and savings.