How to adjust your financial plan for the new year
The Yearly Financial Overhaul
by Olivia Fox
We're told to replace our smoke detector's battery every year, but what about our budgets and financial plan? Are they charged and ready to go for next year? Every November (once we find whether a salary increase is coming or not), we revamp our spending plan. Each time it gets easier as there is more "tweaking" involved, and less "chucking to start from scratch." We evaluate using these questions.
Was each category adequately funded? When we came to the clothing account, was it empty far too often and we had to "borrow" from somewhere else to get a winter coat or a pair of shoes? Are any costs increasing next year? Taxes? Rent? Utilities? Just where will the money come from?
Can we cut back within an existing category, like food? Or clothing? Can we lower the thermostat? Or use less electricity? Are there options for our health needs? Can we reduce our car insurance premium? This is where strategies come in and where most personal finance resources put their efforts. Dollar Stretcher archives are a great place to start.
May we eliminate or must we add a category? Money is either coming or going. Divert an eliminated category's funding to where it's needed or it just evaporates. A new line item has to be funded from existing resources. Tempting as it may be, we don't have the option of printing our own money.
Have any life changing events impacted our budget? Our son starting college has. It's resulted in lower food costs and higher school expenses. When our youngest broke his arm, that made a huge dent in our medical account. Hopefully a raise is coming this year. But we're also responsible for a greater share of health costs. Recovery from or planning for a financial blow takes thinking through the options.
Are you heading for debt trouble? This simple checklist can help you find out and provide options for doing something about it.
Are we on target with our life goals? Can we do anything to better realize them? Let's say retirement is the biggie. Can we skimp in any area to boost savings? Take $5 off food costs every week and we have $260 in a year. Take $20 off and we have over a $1,000. No small potatoes. What investment strategies should we consider? Some people have options through their jobs. Even so, the research burden is on the individual. This may be the time to tackle the stacks at your local public library. Is there a three to six month cushion in place? Are there higher rates out there for our CDs as they come due? Should we consider laddering? Would a money market be a better choice?
Is there any wiggle room? Being financially blind-sided is no fun. Been there and bought the tee shirt. An emergency fund gives you the freedom to roll with the punches a bit more, and even help someone else if they're in need. We try to have one in addition to the cushion.
So let's crack open our budget books, sit down with a cup of coffee, and tackle the job.
Reviewed December 2017
Take the Next Step:
- Consider why you need a spending plan instead of a budget.
- Find out: Do you have a relationship with debt?
- Funding an emergency fund now can help prevent debt problems and even bankruptcy later. Start saving today with these 11 easy ways to find $1000 for an emergency fund.
- Stop allowing debt to prevent you from doing the things you want. These 6 steps to getting out of debt can solve that problem. Get started today!
- Get control of your financial life. Subscribe to Financial Independence, a free daily email that provides you with the tools to help you gain that control and achieve financial independence. Subscribers get a copy of Are You Heading for Debt Trouble? A Simple Checklist for FREE!
Olivia Fox is a stay-at-home mom, who loves finding new ways of doing more for less. She can be found at frugalbohemian.blogspot.com.
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