How to leverage financial security — the laypersons’ guide

In a previous post I highlighted why looking after your overall financial security is more important than looking after your income.

Just looking after your income just doesn’t cut it any more.

Here I go into a few basic principles which go into creating financial security.

Step 1. Get clear about how you use money.

You need to keep track of it. Be honest. You need to know all your monthly income and expenses.

Keep a note of them, use a spreadsheet — I am sure there are great apps out there. Know it by month, by quarter, by year.

I go by my total money in and money out which is displayed on my main account — that is a nice clear number which I can’t hide from.

Data is gold. You can work with data. You just need to know your baseline.

If there is anything leftover each month, you have a positive cash flow — you spend less than you earn. You will then able to use the difference to put towards your savings or pay extra towards your debt.

If you have negative cash flow and are spending more than you earn, you are living beyond your means.