Domestic Debt: Time to Show Some leadership
When it comes to money and debt, a lot of managers manage their income and outgoings perfectly well in the office but fall short of supplying the same leadership skills at home. It’s a real shame, since so many of the skills required are similar if not identical.
After all, budgets are budgets – and whether you’re dealing with million-pound accounts or a £100 shopping bill, a lot of the same logic applies. And in either case, spending beyond your means means debts – and debts all too often mean problems.
1) Don’t waste money you need on things you don’t
2) Take the time to figure out what you do need
3) Learn from your mistakes.
These are just three examples. There are all kinds of parallels between the business world and the home, but let’s take a look at these three. I’m sure you’re familiar with their application in the office, but what do they mean in terms of avoiding debt at home?
Debt rule 1: Don’t waste money you need on things you don’t
Rule 1 of fiscal prudence, really. If you’re not so good at spotting the difference between a ‘want’ and a ‘need’, there’s a high probability that your household will end up in debt sooner, rather than later.
If you’re looking to make the best use of your money and make sure you stay out of debt, you’ll need to draw up a budget detailing what your household needs to spend every month – essentials like mortgage payments, utility bills, essential food & travel, etc.
Once you’ve done that, you’ll be able to figure out what you can all spend on your wants without running into debt problems.
Debt rule 2: Take time to figure out what you need
No-one said it was easy, but if you’re determined to avoid debt, you need to take the time to figure out your domestic finances as thoroughly as they deserve.
Some things are easy – mortgage payments, for example, tend to be the same for months on end (or years on end, if you’re on a fixed rate). Some things, such as petrol and food, will vary from month to month. You might pay for others (e.g. council tax & insurance) on an annual basis, which means you should really set aside a twelfth of that amount every month to make sure the bill doesn’t come as a painful surprise that pushes you into debt.
You can get a lot of the information you need from your bank statements, but it’s a good idea to spend a month or two writing down literally everything you spend, to fill the list out. That should make it a lot easier to add up the figures and find out exactly what you’re all spending on your needs and on your wants.
Debt rule 3: Learn from your mistakes
As in the business world, success in the field of domestic budgeting depends on learning from your mistakes.
If you’ve used a form of debt in the past, whether it’s an overdraft or a credit card, take the time to figure out how much money you actually borrowed and how much you’ve had to pay in interest and charges associated with that debt.
Sometimes there’s no alternative to taking on some debt, but knowing which kind of debt costs less will help you make wiser decisions in the future.