What is Your New Years Resolution?

Its that time a year again. The time of year where everyone resolves to lose weight, to work harder, to be better parents, to be better students, and sometimes even how to better handle their money. Most of us start out with the best of intentions. We really do want to lost weight. We really do want to finally read War & Peace. We really do want to spend more time with our kids. We really want to stop smoking. However, a lot of times, around the beginning of February, is where we fail. We stop going to the gym. We slip back into our old habits and our old ways of doing things once again.

However, if you have made a resolution to better handle your money perhaps we can help. Below are some methods that you can use to get a handle on your finances and get back on track with where you need to be. It may not be pretty in the beginning but honesty with yourself really is the best policy.

Get a picture of where you are now
Its amazing, but most people don't even realize where they are financially. The very first step that needs to be taken is to analyze where you are at right now. Start with making a list of all of your current debts. (click here to download our debt list form) This should include all credit cards, loans, medical, car payments, & back taxes owed. Also on your list include the balances, the interest rates, and what the minimum payments are for each.

Total up the balance and the minimum payment columns. Are there any surprises? This is the surplus debt that the majority of Americans have. Imagine what you could do with this money if all of these debts were paid off! That is what the goal should be for all of us--to become debt free.


Analyze your income
You need to know how much you have coming in to know how much you have to spend. We've included a page to calculate income on our Free Budget Planner for excel. Simply make a list of all of your sources of income including from your job, spouses job, child support, alimony, retirement, etc.


Analyze your spending
We recommend that you track your spending for at least one month in order to get an idea of where your money is going. On our Free Budget Planner for excel we've included pages for all twelve months so that your spending can be recorded. Every time that money is spent it should be recorded in the appropriate category. Do you stop at Starbucks every morning on the way to work to buy a $5.00 coffee? Do you know how much you are spending on cigarettes each month? Do you realize how much you are spending dining out each month?

All of your spending should be recorded: bills, groceries, utilities, doctor visits, personal items, etc. You need to see where your money is going and for what in order to be able to make intelligent choices of where to start cutting back.

Hint - I find it helpful to carry a small list in my wallet so that when I make a cash purchase I can quickly jot it down on the list and then, at the end of the week, enter all of the items on my list into my monthly spending chart.


Create a spending plan
Most people think of a budget as being too restrictive--that they can't stick to a set plan for spending. Well, honestly, that's probably how they got into debt in the first place. Sticking to a budget isn't always easy, but it really is the only way to get your spending on track and keeping it there.

A budget is simply a plan for spending your money. When you analyzed your spending did you see that you were spending way too much on coffee each month? You may want to limit yourself to one Starbucks a week or start making your own coffee at home and taking it to work with you.

Did you realize that you were dining out every other night and how much this adds up to every month? This is a shocker for many people; eating out is very expensive!

When you create your spending plan be sure to include enough for personal purchases. Most people fail to stick to their budget because they fail to plan properly. Ensure that you include money for dining out, recreation, personal hygiene items, hobbies, clothing, & gifts.

Also be sure to plan for expenses that may not occur every month but you need to save for, such as car maintenance, licenses, and taxes. This can be budgeted by estimating the total for each for the year and dividing by twelve. Save this money during the year so that when it comes due you have it--just be sure not to spend this money for anything else!


Stick to the plan
It is normal to want to get frustrated with being on a budget and spending wisely but with a little self-control and perseverance financial freedom can become a habit. In the beginning, it may be wise to get an 'accountability partner'. Maybe you know someone else that is struggling with their finances as well that you can team up with to encourage each other and hold each one accountable for your spending and budgeting.

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