Managing my money
Managing my money

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Managing my money

3.3.1 Jenny adjusts her budget (Stage 3: acting on the financial plan)

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JENNY
Hi Martin! So, I've assessed my situation, and I've come up with some goals that I really want to achieve. Here they are!
First, in the short term, I want to balance my budget. I want to reduce and get rid of the gap between my income and my spending. Next, I want to build up my savings, so I have an emergency fund if ever I need it. And I want to pay off my personal loan, that's a given. So that's all in the short term. In the medium term I want to buy property, maybe even a new car.
I want to be able to afford going to visit my brother in Australia. And eventually plan for a family. But overall, from this point forward, I want to avoid wasting money. I want my spending habits to reflect a more balanced lifestyle and better financial health. What do you think?
MARTIN
Hi Jenny! Those are great goals. Well done in assessing your income and spending. We're in agreement that now you've got to take action. You're spending more than you're earning. If you go on like this, you'll end up borrowing more. In the long-term, you'll never be able to buy property if you haven't got a financial plan to build up savings for a deposit.
First, sort out what is essential spending and what is non-essential. Shop around - using the internet to trim the cost of utility bills, phone bills and insurance. Comparison sites help but do look carefully at all the details of the competing products - often you're not comparing like-for-like. Stop smoking - that'll save you money and improve your long-term health. Consider going out a few times less each month - maybe entertain at home instead? And for some items you actually may have to set aside more money than you are budgeting now. Have you allowed for the cost of possible repairs to your car or the amount you would need to find if you wanted to replace your current car?
Once you've settled on a financial plan, it's time to put it into practice. Remember, as you act on your financial plan, it's important to review your plan and amend it, to reflect any spending needs you need to take into account or habits that have altered. Good luck!
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The only item of expenditure that has increased is Jenny’s payments on motoring costs. If Jenny sticks to her budget, she can save £25 a month and increase her motoring cost payments to £180 per month. If Jenny’s budget is implemented as planned, her income and expenditure profile will look much healthier in financial terms.

In the graph that you’ve just seen, for example, from 2014 Jenny’s income increases and her expenditure falls, and her income exceeds her expenditure. She is no longer adding to her debt (even though it may take her some time to pay off her existing debt), and she now has some surplus income, shown by the shaded area from 2014. Jenny could use this surplus to pay off some more of her debt and/or use it for saving.

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