Moneymagpie Debt Action Plan – Day 2

Do a statement of affairs and start a spending diary

Hello and welcome to day two of the Moneymagpie Debt Action Plan. Yesterday, you got all your bank statements and credit card bills in order and pulled together all your other bills. Today, it’s time to take the next step and complete both a statement of affairs and make a start on a spending diary.

This may sound daunting, but they’re both very easy and together should help you keep on top of your finances. In short they will tell you exactly how much money is going into and out of your household.

People I have helped through this system in the past have said this is one of the most challenging days – mainly because things they’d been trying to ignore were suddenly out in the open. But I urge you to persevere because it will be a real weight off your shoulders.

Do a ’statement of affairs’

Armed with the information you gathered yesterday, you can take the next step towards getting financial control of your life by putting together a money menu (also known as a ’statement of affairs’).

Your new file should now include some combination of bills for gas and electricity, rent or mortgage and phone – as well as the receipts. It’s a good idea to collect receipts for things like spending at the supermarket, on train tickets, at restaurants and in clothes shops. If you have these, add them to your file. If not, make a mental note to start collecting them and popping them in there once a week.

Step 1: Add other income information to your file.

Get hold of your payslips, tax credits, benefit statements, investment information and any other paperwork to do with your income.

Step 2: Work out what money comes into your household each month.

Use your statements, payslips and official documents. This will include things like salary, investment income, tax credits and benefits.

Step 3: Write the ‘incoming’ figures into a statement of affairs table.

You can do this online using this statement of affairs calculator, or if you prefer, you can copy the table below onto a piece of paper or into Microsoft Excel (change the amount of columns depending on your different incomes and expenditures).

	Incomings		Outgoings
	Source	Amount (£)	Expenditure	Amount (£)




Totals

Don’t forget to put in a percentage of money that comes in once or twice a year. So, for example, if you get money from investments twice a year, say £60 twice a year, add that up then divide it by twelve, in this example that’s £60 + £60 = £120, divided by 12 gives £10. Therefore you put £10 down for your monthly investment income (get a calculator out if you need to). Put that amount in the box for the monthly amount.

If you’re freelance, have an erratic income or have an extra money-making activity, it’s also a good idea to take the annual amount you make and divide it by twelve. Then put that in the income column.

Step 4: Add up the total.

That gives you your ‘total incomings’.

So – that’s the pleasant side of the table to fill in. Now comes the harder one – the outgoings.

Step 5: Get out your bills and receipts.

Including annual payments, for your utilities (gas, electricity and phone), travel, food, entertainment, debt repayments, pension and other investments, clothes and so on.

Step 6: Write down your monthly outgoings including essentials and non-essentials.

Make sure to add a monthly figure, rather than a bi-monthly, yearly or weekly figure. You can work out a rough average by adding the total spent on one thing for the year together and dividing that total by 12, if need be.

Start a spending diary

Whether you’ve got wads of cash or you’re struggling with everyday expenses, it’s important that you keep a one-month spending diary at least once every two or three years.

Step 1: Get a notebook and start jotting down your spending.

Essentially, a spending diary is just a notebook that you take around with you every day for a month, where you write down everything you spend every day.

Step 2: Be rigorous.

It doesn’t matter how small or how embarrassing that purchase is – write it down! If you buy a latte on the way to work, write it down. If you buy a round of drinks afterwards and get a bus home, write both of those purchases down.

Step 3: Remember bills.

Put bills in on the day that you pay them (or the day they go out by direct debit). Everything you spend has to go in your diary.

It’s quite startling how these little bits of spending can add up to a horrible, monstrous figure by the end of the month. By writing everything down every day you get to work out quite quickly why it is that the £30 you took out of the cash machine in the morning has disappeared by the time you get home.

In fact, in my experience, the simple act of keeping this diary will cut your spending down after just a few days. On day four you might think twice about that morning coffee and decide to take a flask instead. You might also bring a salad into work and even walk home rather than spend on another bus ticket. It’s so embarrassing have to write ‘tea and cake, £3.50′ every day that you might end up going without half the time!

Step 4: Do this task together.

If you’re married or you have a financial relationship with a partner or family member share the bills between your two diaries but otherwise each of you must write down everything you spend each day.

This will be a test of the honesty in your relationship apart from anything else! Will you be able to own up to that £120 pair of shoes or the round of drinks that cost you £90?

Step 5: Keep it up.

However upsetting (or just tedious) it may seem to keep a spending diary, you must keep the thing going for a whole month.

Step 6: Update your statement of affairs and begin to cut back.

At the end of that month you’ll be able to put more accurate figures in your statement of affairs and, more importantly, you’ll be able to see areas in your spending (and that of your partner) that can be cut back.

Of course, everyone’s different. One person might need to cut back on takeaways and lunches out, while another might need to stop buying so many newspapers and magazines. Pinpoint your particular spending weakness and you’ll be on the road to recovery!

Make a little, save a little…

Make some money by signing up to complete online surveys. All you have to do is register for free with a survey company and then sit in front of your computer answering questions. In return you’ll make as much as £5 per survey, as well as being entered into lots of cash prize draws.

To find out more about online surveys check out our article dedicated to them here.

In the mean time, here are some of the companies you can trust:

Save a little money by looking at our fantastic article Bag a Bargain to see if you can get a better price for items you need to buy. One good thing about an economic downturn means good prices – with Bag a Bargain there’s almost no excuse for paying full price.

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