dothesums blog

In our blog of the 3rd. April, on the probable trends in personal finance we suggested that people will want to take control of their own financial affairs.

Trust has been, at best, severely damaged in the management of endowment policies, pension funds, savings and investments. This is especially true in the case of the banks, where most people had relied upon their 'expert' advice and treated them as their default advisors. I feel that savers have been particularly been treated very badly, but there is no inbuilt justice in economics.

It is inevitable that many people will tend to manage their personal financial affairs in a more business-like way. They will seek to control their expenditure, monitor their cash, preserve the value of their assets and increase those asset values; by using professional business techniques, borrowed from enterprise. It may be that the current interest shown by the public in business, such as 'The Dragons Den' and 'The Apprentice', may stimulate an interest in the use of simple business practices? This feeling could well be reinforced by a general fear in the employment market. Whatever, route is taken it is a sure thing that we all have to be more self reliant and accept responsibility for areas of our lives, that we have previously trusted to others.

We suggest some changes that are not too difficult to follow, but could make our finances better and safer:

1) Get control of the cash. [See General business - Cash is king in business - April 14th, 2008.] Plan for future cash-flows, say three to six months ahead.

2) Control variable costs.

3) Choose and/or change fixed costs to suit the changed economic environment.

4) Get your own personal break-even point lower.

5) Analyse and then select asset purchases, with thorough due diligence.
I suspect new car purchases will languish for some time to come. Everyone knows that depreciation drastically reduces the value as the vehicle leaves the dealers showroom. I also know that new car prices are reportedly below some secondhand prices, but the point is still the same; I hate giving some of my hard earned capital to someone else. As I break for coffee, Liam and Dave my local computer hardware suppliers and friends tell me that purchasers are deserting the big dealers and getting Monkseaton Computers to repair and update existing machines. Makes sense to me.

6) Organise, plan and control our personal resources, especially the financial ones.
By the way, I use a simple Moneydance programme, which is cheap to buy and easy to run, to control all of my business and personal finances. I have no gain in mentioning this software, it just suits me. You might simply use your own spreadsheet version and be just as effective.

Following the events of the last eighteen months, I suspect that many people will employ simple business procedures in their privates lives to be able to feel safer and more in control.