CONSIDER this: Your financial problems are a result of bugs in the way your brain’s operating system works. If you identify the problems, you can issue a patch which will fix the bugs.

Sounds simple, right? So why, when humans will always have a better capacity for learning than machines, are the problems encountered by machines more easily fixed than the ones we are faced with?

For example, in the modern Omni-connected-world where patches can be downloaded to rectify problems with your iPod or your laptop’s operating system, a manufacturer will identify a problem from user feedback, create a patch and allow users to download the fix.

Hey presto – the problem is fixed!

Perhaps if we thought of our shortcomings in terms of ‘bugs’ in a piece of software, we might be more logical about overcoming them.

So, in that spirit, here’s how to upgrade your ‘financial firmware’ to version 2.0, and eliminate those pesky bugs in version 1.0!

Financial Firmware v2.0

Release Notes

12/01/2011 

System requirements:  Financial Firmware version 1.0, the humility to accept your shortcomings and an open mind.

Known issues with v1.0

Financial firmware version 1.0 suffered from bugs in the budgeting, savings and spending applications which made it difficult for users to manage their money, left them unprepared for unplanned expenditures and prone to overspending.

Fixes:

Firmware version 2.0 implements a new set of rules which prevent users from overspending, having difficulty managing their money and being unprepared for surprise expenses.

The rules are as follows:

• Users must create a savings account with the equivalent of three months’ salary to protect against surprise expenses such as car repairs, extended periods of illness or injury and increased living costs. Version 1.0 caused users to deal with these expenses on an ad-hoc basis, which resulted in increased stress on the system.

• Large purchases, particularly those made online, should be purchased using a credit card. Version 1.0 suffered from a security flaw, as users made these types of purchases on debit cards or with cash, leaving them unprotected in the event of the merchant going out of business. The new rule in version 2.0 gives users improved protection by implementing the credit card rule on large purchases like flights, holidays or other online transactions.

• All non-essential purchases must be scanned and quarantined for seven days before they are carried out, allowing the user to make a better assessment of whether they can do without the expense. Version 1.0 was prone to impulse buying, which often led to financial difficulties later on.

In English, please!

Okay, okay, I know – we are not robots! It’s not always as simple as identifying a problem with your finances and switching it off, because people are fallible. We don’t blindly follow rules like a machine, and making these kinds of changes requires maturity and discipline.

In simple terms, there are certain things you can do, starting today, that will help you financially in the long-run.

If you don’t already have a savings account, you’re vulnerable to things like car repair bills, or losing your job. You may think that you can’t afford to put savings at the moment, but if a surprise expense was to crop up (and they invariably do!) you can’t afford not to have money in savings.

Think more carefully about your spending. Work out how much disposable income you have every month and be realistic, do you really need that new TV?

Challenge your financial preconceptions. You might have avoided credit cards like the plague in the past, but they can have their uses. The added security they provide on large purchases and online shopping is a no-brainer. The idea of a balance transfer credit card might seem like digging a bigger hole for yourself, but you might be costing yourself more money by not transferring the balance on your current card.

The key is to be reflective and analytical, looking at your old way of managing your money so that you can identify anything which might be causing you problems.

So, if you’ll excuse me, I’m off to update my financial firmware! 

Louise Tillotson is a financial writer in the UK, with particular knowledge of personal financial products such as loans, credit cards and debt consolidation.