Create your Baseline Financial Position

In this article I am going to explain how I went about setting my baseline financial position to understand where I was today from a financial position.  This seems like a lot of work, however once it is done it will make the next few stages easier.  It is also a good idea to carry this out once in a while to help you understand where your money is going on a day to day basis.  I was quite surprised to find out how much I have been spending on travel.

I have separated out my bank accounts as discussed in Setting up for Success, so the first part of this is easy.  I calculated out the following groups of expenses:

Current scheduled monthly outgoings, this will include such things as:

• Mortgage/rent


• Council tax


• TV licence


• Utilities


• Subscriptions


• Mobile phones


• Insurance


• Home phone and broadband


• Loans

I then calculated an average outgoing for a month from over the last three months for my general spending account, this included such things as:

• Food shopping


• Eating out


• Nights out


• Days out


• Entertainment


• Clothes shopping


• Fuel


• Parking costs

I then calculated any regular savings plans that I pay into as these are savings and will be treated differently.

• ISA’s


• Saving’s accounts


• Endowments

Once this is all calculated I needed to understand when any of these regular costs are going to finish.  For example, if you have a car loan, when does it complete and do you intend to take out a new one, or if you are doing a repayment mortgage when will you have paid this off?

Next I needed to take into account any big spends that I had, had during the year, such as holidays, car service, new TV, etc.  While these are one off’s they can have a huge impact on where your money is going throughout the year and unless you intend in drastically changing your life, they need to be included to understand your monthly outgoings.  I therefore added these all up over 12 months and divided by 12.

Finally, I added up all my current savings; this enabled me to get to a baseline where I am financially.  I included the ISA’s and saving accounts in this calculation.  This also includes any pension that you currently have saved, this can be difficult if you have worked for lots of businesses over time and are not sure what or where your pensions are.  The Government provide a service to help trace lost pensions, Pension Tracing Service and the Money Advice Service provide information on how to track down lost and old pensions.

I also found this a really good opportunity to carry out a review of my outgoings, where I am spending my money and if there were any questions on what specific expenses were going out.