Through the many clients whose finances we coach, we too often see the absence of these 8 best practices. Do you know them ?
- Limit (and even eliminate) the use of deferred debit cards
Deferred debit cards are a real drag on your ability to manage your finances.
They are neither more nor less than a debt to your bank, which clearly distorts the view of your spending during the month.
Depending on the banks and the bank statements they generate, they really make it difficult for you to read your bank balance before you get your paycheck.
If you want to use them, you really have to reserve them for business expenses that you may incur and which are reimbursed to you by your employer.
- Know your fixed charges
Whether you are self-employed or an employee, it is always important to have an excellent knowledge of your monthly fixed costs.
A priori, we often tend to minimize them and when we start to sum them up, we can reach fixed charge ratios greater than 70% of total charges. At this stage, it is then normal to feel “suffocated” by the weight of these loads.
To correct the situation, you sometimes have to be able to question a lifestyle that is not suited to your income.
- Monthly all expenses (as much as possible)
Your salary is monthly, so should your expenses. Monthly as much as possible: Taxes (on income, housing tax, property tax), insurance premiums, condominium fees … whose deadlines are not always monthly.
We are sometimes tempted to push back certain deadlines to deal with one-off financial difficulties, or on the pretext of not wanting to “advance” money to the government or to certain suppliers.
If you properly provision these charges on passbooks, this is already a good thing, but it requires great rigor. On the one hand, you need to make sure that you fund regularly to cover the charges you anticipate, but on the other hand, you need to resist the temptation not to use that money for other purposes!
Monthly payment of ALL its fixed costs seems to us to be the optimal solution. It saves you an unnecessary mental load and puts you in front of your financial reality as soon as possible (and not in December, when it’s time to fund the holiday season).
- Save! Store at least the equivalent of 3 months of income in available savings
Available savings are considered to be money that is stored in secure savings accounts such as livret A, LDD, LEP, PEL or life insurance (funds in euros).
Savings are a fundamental tool (and a very relevant indicator) of financial management.
That part of your resources that is not (immediately) consumed is essential for:
Covering the vagaries of life (disasters or loss of income): it is precautionary savings
Provision for anticipated constrained expenses (taxes, copro charges, etc.) that would not be paid monthly: this is constrained provision savings
Provision for your medium-term projects (vacations, car changes, professional retraining, real estate projects): this is “project” savings
Strive for financial independence: these are the reserves in expectation of investment.
Savings are a kind of shock absorber that allows you to offset any financial variations you may encounter, both in terms of income and expenses. Its importance is paramount.
- Make your banker an ally
We recommend that you maintain a healthy and regular relationship with your banker. You might think that hitting the right bank advisor is more a fluke than a management choice, but we don’t really agree.
You should see your banker as a service provider (financial in this case), a true partner with whom you can maintain open and useful communication, in the service of your financial situation.
Your banker will thus be more inclined to offer you financing solutions adapted to more strained financial situations.
If you do not manage to have this kind of relationship with your banker, perhaps you should think about changing it or at least compensating for these shortcomings by using a coach specializing in personal finance?