Managing money can be hard, many of us lack confidence with wealth. At worst we ignore bills and bank statements and bury our heads in the sand, aquiring mountains of debt along the way. Often our behaviour only stops because a major financial disaster forces us to change our ways.

In dealing with money there are two basic concepts. Our income and our outgoings. This is all pretty obvious so far, and we all know that if our outgoings are more than our income then we are in trouble. I would go further than that and say that unless our outgoings are SIGNIFICANTLY lower than our income we are heading for stormy waters.

If you live on a very tight income excess, it will be virtually pointless if you don’t have sufficient funds to cover a period of illness or unemployment. If you are congratualting yourself because you don’t spend all you earn then please stop ! You are kidding yourself that simply not accruing debt on a day to day basis is all you need to do.

To be financially secure, and ultimately wealthy, we must gain as much leverage from our income as possible. This means eliminating all debt, spending significantly less than we earn and saving and investing the rest. Now, many of you may be feeling pleased that you save regularly. Many people should STOP saving right now, as they are wasting their time and money !

If you have debts of any sort and you are saving money, it is highly likely you are wasting your money. In order to make a profit loan interest is almost always higher than savings interest. The obvious exception is 0% rate introductory offers on credit cards. Other than that always pay off all of your debts before you start saving !! I know so many people that are in debt yet save – they live in the false knowledge that they are becoming fiancially secure.

The key to financial stability is budgeting, but that can be hard for all of us. I find creating a spreadsheet and updating it weekly helps to plan how I distribute my income. I put down all my fixed, or near fixed costs, such as travel, internet and telephone bills, I then factor amounts for any social events that will be occuring, such as bars, restaurants and parties.

This then leaves me with an amount left over. Of this I remove ten percent to cover any unforseen eventualities. I cannot tell you how often I have been thankful for this amount. Out of the remainder I take essential purchses such as clothes and then progress onto things I would like.

This all sounds well and good, but as you know its SOOO easy to go over your set amounts. Here is an idea I think will help, that someone told me a few years ago – split your budget into catagories such as bills, food, travel, socialising etc. Then make envelopes - each with one of these titles on. Then put in the proportion of your income that each catagory needs. Try not to use debit or credit cards – just take money out of the envelopes as and when you need it.

For some reason, when you can physically see your money going down, but you are not carrying it round with you all the time it becomes much easier to avoid non essential purchases.

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