High rates of inflation and an ongoing cost of living crisis can put a strain on even the best-managed budgets.
As a result, a lot of people are tightening their belts and trying to keep on top of their spending as prices rise.
Although, regardless of the economic climate and your own personal circumstances, it always makes sound financial sense to track your spending carefully.
According to Statista data, 93% of people in the UK bank online now, so it’s relatively straightforward to see your financial details at the touch of a button.
You can take this financial control a step further by using new technology to analyse your spending habits through a budgeting app.
Read about some of the best apps, together with some other practical ideas to help you track and manage your spending.
1. Make sure you have an overview of your income and expenditure
Regardless of how much you earn, being in control of your money gives you valuable clarity and peace of mind.
Indeed, many of our most wealthy clients are the most fastidious when it comes to knowing how much they are spending.
The first step towards gaining control of your money is to establish what your income and expenditure are on a monthly basis.
A simple spreadsheet is easy to set up yourself and you can tailor it to include all the information you wish.
Your bank statements will tell you all your regular mandates and standing orders. This will help you identify your monthly and quarterly commitments that you can then list under different headings such as:
- Insurance policies
- Utility bills
- Credit cards and loans
- Investments and savings
It’s very likely that simply by going through the process of reviewing your mandates, you will find items you can cancel, saving you some money each month.
2. Separate your discretionary spending from regular outgoings
Having established what your regular monthly outgoings are, you then need to get a clear idea of your discretionary spending.
Again, your recent bank statements will tell you how and where you spend your money each month. By going back over several months, you should also be able to start identifying areas where you are overspending unnecessarily, such as meals out and other entertainment.
By doing this, you can develop a clear idea of how you spend your money and make it far easier for you to plan ahead and manage your finances effectively.
3. Make use of different accounts
One effective way you can keep control of your outgoings is to have a secondary account for all your discretionary spending.
I can vouch for how effective this can be to help you manage your money because I do it myself!
I have an account with HSBC for all income and regular outgoings. I then transfer a fixed sum each month into a secondary account for all our family expenditure.
By doing this, you’ll know each month how much you have to spend on non-essential items and will be able to keep on top of your commitments.
Robo-banks have become increasingly popular recently, with some offering good rates of interest on their current accounts. I use one of these – Starling Bank – for my secondary account.
All banks will let you transfer money between accounts, so it’s easy to have a series of sub-accounts for savings earmarked for a specific purpose, such as holidays or Christmas.
4. Use online apps to track your spending
There are many quality apps now available for you to use to keep track of your spending in real time.
They can help you analyse your savings and current accounts as well as your credit cards, and break your spending down into different categories for you so you can easily see where your money goes each month.
They will also itemise your various regular subscriptions to see if there are things you are paying for and not using. Many of them provide other useful facilities that can help you manage your money and get control of your finances.
There are two different types of money management apps:
- Ones that link securely to your bank account and access your information directly
- Standalone apps that you input your information into.
You will also find that some of the neo-banks, such as Starling and Monzo, will automatically offer useful features to help you manage your money.
These include personalised spending analytics, and the facility to split your money into different pots within one account.
5. Use cashflow forecasting for longer-term analysis
Uncertainty about the future can make it difficult to plan ahead, particularly for long-term objectives like your retirement.
Not knowing where you’ll be retiring, with potential differences in living costs and property, can also add another layer of doubt.
Meanwhile, by using cashflow forecasting, it is possible to obtain the necessary information to allow you to make informed decisions about your expenditure on a year-by-year basis.
An effective forecast will take a variety of data into account, including:
- How your investments have performed
- Current and projected rates of inflation
- Income you’ve already taken.
It can also consider various potential scenarios, both personal and external events, to see how they could affect your future finances, and whether you should be adjusting your plans as a result.
Get in touch
If you like to talk to us about any of the issues you’ve read about inn this article, please get in touch.
You can contact us by email or, if you prefer to speak to us, you can reach us in the UK on +44 (0) 208 0044900 or in Hong Kong on +852 39039004.