Personal Finance: Stretch your cash

Financial review: a six-part series on how to be prosperous in '99; Part 1: how much am I worth and where does it go?

WITH so many financial deals on the market and so many other calls on our time and money, it is tempting to put off financial planning. Recent events, including a turbulent year on the stock markets and further revelations about mis-sold pensions, will have caused many investors to pause before making a commitment. No one wants to be sold a pup.

The result is often indecision, which, experts say, is the worst choice of all. Many people have substantial sums left in current accounts that pay little or no interest. People with big debts on credit cards or store cards can be paying as much as 30 per cent interest, without realising they could pay off the bills using money in deposit accounts earning just a few per cent.

Conflicting financial demands create another common reason to put off planning. Younger households in particular may have to prioritise their financial objectives. It may not be realistic to contribute to a pension, set aside money to move house or for school fees, increase short-term savings and invest in the stock markets. But there are ways to make existing funds stretch.

It is almost always possible to make money work harder. "Quite a lot of people have several thousand pounds in a bank account or even in a low paying building society account doing nothing," says Bina Abel, independent financial adviser at the Bradford and Bingley building society. "It could be working for them."

The first step towards creating a personal financial plan is to make a list of assets. This can turn up surprises. People in their twenties and thirties will usually find they have more liabilities than assets. Older householders might discover that they are worth more than they thought, especially if they have paid off a substantial part of the mortgage, or the value of their house has risen over the years.

Sometimes investors overlook other pots of money, such as insurance policies, small shareholdings, or funds with friendly societies or National Savings. Establishing exactly how much money there is and where it is is the key to making the most of it. Individually the returns on savings or investments might be poor but by bringing them together in a high-interest account or, in the case of shares, adding them to a tax-efficient plan such as a PEP or the forthcoming Individual Savings Account, they should improve.

"The most obvious starting point is to make a list of what you have," suggests Justin Modray, at Chase de Vere, financial advisers. "This includes your current account, PEPs and Tessas and shareholdings, not forgetting demutualisation shares. Once you have done that you can work out what it is worth; it is tedious, but once it is done, the hard work is over."

Then you need to look at outgoings. Budgeting is a worthwhile exercise even for people whose finances are stable; for anyone with debts, it is vital. Filling in a checklist (see left) is a handy way to see exactly where the money goes.

Once you have made a list you will spot areas where spending can be reduced. There are almost always ways to cut costs without affecting money for holidays, entertainment or leisure activities. Then you can go on to sort out your debts and make 1999 more prosperous.

Over the next five weeks we will be offering advice on how to sort out these key areas of your finances, including banking, debt, insurance and investments.

what are you worth?

Fill in a spending chart over a month. Carry a pocket book with you to record all your spending and always keep credit and debit card transaction slips. Add extra spending sections where they apply to you (for example, childcare, public transport costs).

Money coming in

Salary; other income (extra work, money from investments); other payments (benefits, pensions).

Spending

Mortgage/rent; council tax; loans; insurance; utility bills; regular savings; car expenses; credit cards; bank charges; food bills; other shopping; entertainment; clothes; magazines and papers; pets; other expenses (holidays, presents and so on).

Subtract your total spending from your total income to find out your shortfall or monthly surplus.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee