Wednesday, March 22, 2006

Evaluating your finances

I evaluate my finances very regurlarly but I want to talk about a simple, quick evaluation I do every year and a half or so.

I do it while I am chilled out, I don't think I would be able to do it if I wasn't relaxing. I simply take a pen and paper and start jotting some notes about the major aspects of my money:

Mortgage roughly: £9000
Petrol: £2880
Car ins: £1000
House bills: £2700
Savings: £6000
Food: £5000

I don't beat my head on the table until I have remembered where every last penny has gone, I just think about my main expenses each month and come up with a rough figure of how much it was over the last couple of years...

When i have done this I start scribbling some really rough broad notes next to it:

Mortgage - What is my interest rate, do I have the best deal, how long left on this, Is buying better than renting, why?
Petrol - Where do I go in my car, where am I buying the petrol......and so on.

I do this to question myself, sometimes over the month to month working of things you don't notice that you could be saving quite a bit in the long run.

I will then start to evaluate the notes:

Mortgage - Current interest rate: 4.75% (2 yr fixed, 8 months left), current best mortage rate 4.9% tracker, rent on similar house would have cost roughly £7600, equity gained on house £12000. etc etc

Just writing these quick fire notes, never taking long to think of them, just writing them down as they come and then finally spending an hour to evaluate my questions must have saved me a fortune. Sometimes small savings are overlooked but if you look at your spendings over a longer period of time you can get a clearer view of your finances and where you are heading.


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