Your Budget

Tying It Into a Package - Inflation puts the squeeze on

To hold safe and secure in the face of moderate inflation each year is duck soup. What is crippling family budgets these days is a rampant, pernicious inflation that smacks of disaster. Creating a family budget is hard, frustrating, and absolutely essential. The £25,000 junior executive suffers woefully, and even the £200,000 top manager or professional finds himself in a bind.

Soaring prices for everything from food to home repairs are shattering all the old rules on personal spending, and forcing nearly everyone to learn some new rules. For example, your thinking on how big a house you can afford and how much to budget for your childrens' education is probably out-of-date.

And the squeeze calls for more care in managing money by just about everyone. More businessmen who once managed their personal finances on a haphazard basis are planning ahead now to help make ends meet. That can involve hiring an accountant or a financial adviser skilled in sniffing out pound-wasting goofs and pound-saving ploys. Or, it can be something as simple as learning to draft a workable household budget and a personal cash flow statement that can estimate disposable income for the coming year.

The point is that businessmen - even those who handle million-pound budgets on the job - frequently slip up when it comes to managing their own money. "This kind of helpseeking - budgeting especially - is a switch among men who have a long history of neglecting their personal finances," says Arthur S. Brown, a London Accountant who counsels a number of executives on their money. "The average executive," Brown warns, "is usually too devoted to his job to take time and energy for his own affairs. It costs him."

Brown ticks off some examples. "Simple things add up," he says. "Many executives are missing at least a £500-to-£1,000 deduction for the office at home. The simplest advice would take care of that."

One estimate is that only 40% of executives with children under 18 have developed any sort of school financing plan. "The others let school financing develop out of last-minute desperation," says Arthur Hummel, directorof Aims Group, Ltd, an Aetna Life & Casualty Co. subsidiary. "As for budgeting family expenses," says Hummel, "that is either ignored entirely or handled haphazardly by the vast majority."

Step one for the businessman should be an annual audit of all personal finances, covering assets, liabilities, and cash flow. Actually this is a prerequisite for any workable approach to personal money management. The audit should be done during the first quarter of the year - early enough to spot potential losses and nail down potential gains. "Year-end personal financial planning," says Hummel, "is mostly sweeping up a disaster."

What follows is more specific advice on how to develop a personal money management program and make it work.

Interested inHints On Spotting Fakes?

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