Bob's Blog

Overeaters are more than likely in a much worse off financial situation to their healthier counterparts that is according to research conducted by psychologist Dr Stian Reimers of University College London.

Dr Reimers interviewed 40,000 people and the survey hinged on the answer to this one question: Would you prefer to receive £45 in 3 days time or £75 in 3 months time? Nearly half of the respondents opted to take the money upfront and interestingly these same respondents displayed a raft of other impulsive behaviours.

The survey demonstrated that the ‘money today’ people tend to ignore the future in other aspects to their lives, “They are more likely to smoke or be overweight, which may reflect a preference for immediate pleasure of nicotine and food over long-term good health. They are also more likely to admit to an affair in recent years, suggesting another manifestation of desire for immediate gratification.”

So all things considered, is budgeting a waste of time for an impulsive personality? The key to financial success is first and foremost to ‘know thyself’. Take it one step at a time until you get to the end of the process. The 5 steps I have identified from my own personal experience are:

1. Detail all your regular monthly expenditure including direct debits and standing orders, such as electricity, home insurance and the contribution to Concern and so on. Remember, it’s expenditure you’re noting down here – savings accounts don’t feature, yet.
2. Make a note of all renewal dates on policies and most recent premiums paid as a guide for future costs. This may involve calling the companies involved for clarification.
3. Factor in provisions for foreign travel, weekends away, socialising, Christmas expenses and birthdays – notable expenses in particular.
4. Create a list of all financial products and services you use one by one, such as mortgage, credit cards, loans, overdraft facility, current account, home, health, life, car insurance, income protection policies etc.
5. This is a very important point! Pick up a little red notebook, you know the kind. Any household expenses from groceries, coffees, toilet duck, meals out, bottles of wine, fuel for the car and anything else you can thing of should be jotted into the notebook for an entire month. This will help you identify how much you spend on non essentials. I can almost guarantee you that there will be a number of items that will shock and surprise you.

When you have ticked the 5 items off your list – it will take you an entire month, it’s then time to psychologically prepare yourself for action. It’s just like getting fit. If you can identify what went against molding your six-pack way back when, then avoid the same trap in creating a lean budget.

At this point, you have an annual figure for your expenditure that you can break down into quarterly, monthly, weekly or daily amounts whichever you find easier to track. After that, it’s time to list your after tax income. How do the two figures compare?

If you earn less than you spend (debt), it’s time for immediate action. If you spend less than you earn (credit), the trick is to identify a way to put your surplus to good use or bump-up any savings you may currently have.

Going through the list above one by one, you should be able to identify any policies that are unnecessary and cut them immediately. From there, you should be in a position to review existing policies to ensure they are (a) suitable and (b) competitive. After you make any necessary changes here, it’s time to turn your attention to your non essentials – your 9 lattes per week are non-essential whereas your mortgage repayments are undoubtedly essential.