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Published on April 15, 2008

If you are one of those who live beyond their means or from one paycheque to the next without saving for emergencies, you should be managing a personal account.

Managing an account could help you find a way to live within your budget or provide a safety net for your retirement.

To manage a personal account, all you need to do is follow five simple steps: set your objective, write down your expenses, analyse your behaviour patterns, lower your expenses and seek an additional source of income.

First, you must have a reason for managing your personal account, because this will give you a clear direction and encourage you to achieve your goal. The plan will inevitably bring about a change in your spending patterns, but one that should be practical.

If you are the type of person who lives from paycheque to paycheque, you may need a strict spending plan.

Those who are in the red may want to minimise their debts and eventually write them off. You may want to increase your savings for emergencies, a house or your retirement.

Once you have consolidated a plan, you should immediately start managing your account. All you need are a few blank sheets of paper with tables for dates, income, expenses and the amount of disposable cash.

You should keep your mind focused on your accounting, even though you may not enjoy doing such things. The discipline will eventually pull you out of your vicious cycle.

You should list all of your income and expenses, even if some expenses total only a few baht. You may discover some behaviour patterns you were not previously aware of. Moreover, you must remember that your personal account must be managed on a daily basis and not "whenever you feel like it".

Next, take an in-depth look at your account and examine your spending patterns. This step is crucial in bringing about a change in your expenditures.

You must differentiate group incomes and expenses that are similar. For example, income may be grouped as fixed or temporary. Expenses may be grouped as food, transportation, entertainment and social.

You must calculate what percentage of each item accounts for the total figure. For example, what is the percentage of food expenses for total expenditures?

Next you should list all of your expenses by level of importance. Now you will have a complete picture of your spending patterns.

The fourth step will demonstrate your will-power, because now you will carefully have to consider how to lower your expenses.

You should cut back on unnecessary expenses, even ones that may afford you physical or mental pleasure. They may also be harmful to your health, such as snacks and alcohol, or not serve any purpose, such as buying clothes you never wear.

Some expenses cannot be completely slashed, but they can be lowered. For example, you could exchange high-end cosmetics for cheaper ones of the same quality. You could switch to a new hairdresser, spending only a few hundred baht instead of thousands - and look just as good.

Finally, if you cannot balance your account by reducing expenses, you should try seeking an additional source of income instead.

This is not a solution for everyone, particularly those with limited time. However, some may find it easier to find other sources of income than cut expenses.

Those who choose this option should realise they will need to spend time job hunting. Without proper time management, a new job could ruin your primary place of employment or consume all of your free time.

Managing a personal account is the best way to help you set your finances straight. With five savvy ways to stretch your cash - set an objective, fill in the expenses, review behaviour patterns, cut costs and hunt for additional sources of income - you could be leading a better life.

Anoma Srisukkasem

The Nation