562. Banks

Banks are institutions that exist in society for the purpose of making bonuses for their directors. Despite their protests to the contrary, they do NOT exist to serve their customers. So long as there is a profit in it for them, they will serve your needs. Once your agenda and theirs diverge, you can no longer rely on them for any kind of support.

Banks can be a useful place to store your money but they will only pay you a paltry rate of interest and will put as many obstacles as they can in your way when you try to take it out again. Today, using electronic methods to move your money around is your best bet. You do need this facility so banks are a necessary evil.

Banks and bankers are not known for their high level  of intelligence or their fine communication skills. They are prone to losing your paperwork and telling you incorrect things in their letters to you. They also make errors when conducting transactions such as misplacing decimal points. You need to watch them carefully and NEVER trust them to get it right.
To achieve great things, it is necessary to exert leverage. This means that you may have to borrow money from the bank once in a while. Once your objectives are clear and you are protected on the down side, this is fine.

DO NOT, HOWEVER, RUN YOUR LIFE ON DEBIT FINANCE (BORROWING).

Do not borrow money for day to day expenses. Keep as large a reserve of cash at the bank as possible so that you never, ever, ever go overdrawn. A suitable amount is one month's gross income. Learn to live within your means and do not give the bank any leverage on you. Leverage is power and the pettifogging little toads will squeeze you at every opportunity. Don't give them the satisfaction.

The key to staying out of debt and living within your means is to master the art of budgeting. At a simple level, this means knowing how much money you have coming in and how much you must pay out. You need to know these figures for the year, quarter, month, week and day. Using spreadsheets makes this exercise very easy. The secret is to set your budgets so that for every day of the plan there is a surplus. The next stage, once you have created the budget is to STICK RIGIDLY TO IT and do not deviate. If you haven't budgeted for it, DON'T SPEND IT !

If you live by this plan, you will have a surplus at the end of the year. Reward yourself by spending 10% of it and invest the rest.

419. The Relationship between Budgeting and Poverty

Make friends with your budget. Create one from scratch and keep refining it. Always live within it - this will make you disciplined about money. Your budget is your first line of defence against poverty. Without one, hou have no hope of avoiding red-lining. Keep your budget under review, line by line and week by week. It is not enough just to create it and file it away. It must be a document that you live by.