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How financially savvy are you and how to clean up your act?

Since I started The Money Principle I feel more comfortable talking to my British friends and acquaintances about money. Well, this and the fact that after over 20 years in the UK I am finally convinced that as a ‘foreigner’ no one really expects me to know how to behave; so I may as well take full advantage of this and have great fun on the way.

The point here is that I talk to people around me about money more often. And I get two very different reactions: a) ‘I am very good with my money and always have been’; or b) ‘oh, I am so hopeless with money it is not even worth the bother talking about it’. Neither statements is made with pride and the latter is usually accompanied by the kind of superior dismissiveness indicating preoccupation with ‘better’ and ‘higher’ things. I know about it; this used to be my answer. However, I suspect, that nether the people in the first group are so savvy nor the people in the second so hopeless.

So, let’s do a very simple test and see whether the results match your perception of yourself.

1.When did you look at your bank statement last?

  1.  During the last month;
  2. Over a month ago;
  3. What is a ‘bank statement’ and where do I find it?

2.Do you know what:

  1. You pay for things?
  2. You should be paying for things?

Now, if you answered that you have checked your bank statement during the last month and that you know what you pay for things and what you should be paying for them you can stop reading and go do something more useful. If, on the other hand, it has been over a month since you checked, or the Universe help you, you don’t know where to find your bank statement; and you have answered ‘no’ to one or both of the next set of questions KEEP READING.

You have to clean up your act!


If you don’t know what is in your bank account and what is going out of it the likelihood is you are in trouble.

If you don’t know how much you should be paying for things you are likely to be paying way too much; in other words you are in even bigger trouble.

The good news is that you can start cleaning up your act in three easy steps.

Analyse your bank statements

Your bank statements are either in a pile of unopened, or opened and discarded on the floor, letters or you if you do internet banking you can find these on your bank’s web-site. Please, start looking at them and analysing them properly. Take the last six months and check:

a)      What was your balance at the end of YOUR financial month?

b)     Divide your expenditure in three groups: constant (these are the expenses that are fixed for a long period and you can’t change like mortgage, loans, council tax, water rates etc.); changeable (all kinds of insurance and telephony that can be negotiated) and variable (food, entertainment, clothes etc.). You can find a tool to do this here.

c)      Calculate the proportions of your income that go on each of the spending groups.

d)     Check your income: are you getting all you should be getting?

Look ‘outside the box’

Many people do the first step and they know what goes in their account and what goes out of it. They never move beyond this because they assume that what goes in and out is what should go in and out.

Being in control of your money means to know ‘what should be’…

…not only ‘what is’.

This is particularly important in the categories of changeable expenditure. After you know what you are currently paying you should look around: compare car insurance, check what other house insurance providers can do for you, check whether you can get your health and dentistry insurance cheaper elsewhere, and shop around for your life insurance.

I know, it is a bother isn’t it? I thought so as well until three years ago, by doing what I preach, I discovered that many providers’ business model relies on ‘suckers sticking around’. We were paying twice what we pay for life insurance now and were under-insured; we paid 20% more for car insurance and our house insurance was the ‘cherry on the cake’ – we were not only paying three times what we pay now but the company we are with lowered the price. I found this offensive but hey, it did bring all these costs down.

Do you know that by doing shopping around and comparing prices we saved ourselves well over £1,000 ($1,581) per month? So can you!

Know thy prices

Comparison is the mother and father of savvy shopping; there is no doubt about it. But with the items under changeable expenditure you can use different tool so you don’t have to remember the prices of different providers. It is different when it comes to controlling your variable expenditure: then you have to know your prices. You have to know how much a pint of milk and a loaf of bread cost in a different supermarket. You have to be able to compare quality as well…

I have a very big problem remembering ‘my prices’ and my way around it is that I write (or did write for a long time) everything. Now I go by store – not perfect, I know, but the best I can do; short of shopping for food with my laptop open and my complex spreadsheet on the screen. What a geek!

Final words:

Many of us are far from being financially savvy; even the ones who think that they are. This can be achieved in three easy steps: analyse your financial statement every month; known not only what you spend but what you should be spending by comparing prices; and learn the prices of everyday items do that you know a good bargain when you spot one. That is all!

12 thoughts on “How financially savvy are you and how to clean up your act?”

  1. I think my honest answer is that I’m improving, very much a work in progress. Bank account amounts known, regular bills known – husband’s variable income is the big unknown, and therefore can screw any fancy budgeting I want to do…but we are slowly getting to a point where we can cope with that. Still have debts but there is a plan, and its working – now to “beat” our plans and kill them more quickly!

  2. I used to shop with a calculator in hand to ensure I didn’t go over budget, now we can usually stay in budget since we buy mostly the same items. I can ensure you I’ve never seen another person use their calculator when shopping.

    • @Brent: Well I do but use my phone. I kind of like to be prepared. Another thing we started doing is, because we know how much we spend on food, drinks etc. I take my variable expenditure out in cash. Works a dream – have not overspend for over a year.

  3. You say “that is all” but that was an extremely detailed and comprehensive article. How accurately do you think we should know what’s in our account, to the nearest £1, or pence, or £10? And Brent is mistaken: people may have calculators on their phones! 😀

    • @MultiMillionaireRoad:This depends on the account you have. We have up to £500 overdraft without paying interest or penalty. So I follow not what is in the bank account but what is on my budgetting spreadsheet. I know what we have spent on what to within £2 difference. When your budgetting gets so precise your bank account is fine – no need to check every three hours (as I used to do before gaining control).

  4. I really like your simple test to see how financially savvy you are, you have hit the nail on the head in terms of not being able to answer the questions correctly, most probably means you are in some sort of financial trouble.

    I was also amazed at the savings you have been making – £1,000 a month by shopping around – that’s phenomenal!

    • @Donal: Thanks and glad you found it useful. And yes – this is the large initial gain. Then one ought to check regulary for deals to keep them at the same level (or lower).

  5. The thing is that it is not how financial savvy you are makes the difference for most of us. It is whether you do have enough money to put aside.
    How a look around many people how talk and know about finances remind me obese people who know everything about advantages of being slim. But there is no action on that knowledge, only endless talk : -)


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