A new year, a new start….

2017 is here. Your New Year’s resolutions are in full swing and yearly travel plans and holidays are being researched. Now as always it is time to predict, assign, keep score and possibly do some careful post-mortems of your financial life.

Yearly predictions are always difficult and 2017 is already up for grabs with the UK invoking Article 50 in March. Will le Pen win France and Merkel lose Germany? Trump and Putin? China’s currency and Venezuela’s default?

With all these big predictions in the air, it’s easy to sometimes forget the basics of your own financial life. Boring as it may sound, household budgets are important.

With the intent of avoiding to sound patronising, let’s start with the basics and ask yourself: “What is the use of a budget?”

When done properly, it is the best measure to analyse your finances beyond compare. In fact, it answers two key questions that haunt us all through our daily lives:

(1) Do I really spend more than I earn?

(2) What can I afford?

Let’s look at each of these in turn


You will have a sense when you are either building up personal debts or eating into your hard-earned savings that you will already know you are overspending. To solve any such situation for you or your loved ones, the key here is to get a more precise evaluation of the size and severity of the issue. I cannot help but repeat the exert from the Charles Dickens’s character Mr Micawber in the novel David Copperfield:

“Annual income twenty pounds, annual expenditure nineteen [pounds] nineteen [shillings] and six [pence], result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.”


As soon as you really do know what you are spending, only then can you make a start on prioritising your spending and living within your means. The challenge isn’t just analysing your budget – it is to learn to stick with it.

After you acknowledge the shortfall and challenge to balance your daily budget, you cannot simply then focus on a month-by-month basis in complete isolation of what it means on an annual or even five-year basis. This is because each month does not consider those annual one-off costs such as holidays, Christmas, the replacement of white goods or a car every 5-10 years. In fact, a car is a classic example of how your money can disappear quickly since not only (aside from collectibles) does the value depreciate as time moves forward, you have the additional costs of fuel, insurance, servicing, etc.

Conclusively, the way you plan your budget needs to be as important as what you put in it and should be checked on an annual basis.

There are plenty of free online budget planners you can utilise. If you are already employing an adviser or business manager, they should already have built in in their objective opinion and expertise on an annual basis, at the very least.

If the results of your budget analysis prove that you are overspending, then you need to look where you should be cutting back. Here you are looking at some short-term pain for the longer term gain.

A strong healthy household budget is one less thing to worry about and an excellent foundation/position to commence your economic predictions for the year ahead.

This article is intended to provide a general review of certain topics and its purpose is to inform but NOT to recommend or support any specific course of action.

By Raoul Ruiz Martinez
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Raoul Ruiz Martinez is a resident and independent consultant for Finesco Financial Services Ltd., Glasgow and advises clients on private financial matters in both the UK and throughout Europe under the MiFID regulation. Finesco Financial Services Ltd is authorised and regulated by the Financial Conduct Authority (FCA). Some of the services provided are not regulated by the FCA because they are not included within the Financial Services and Markets Act 2000. | 289 561 333