Now, it's time to get back to our money matters. With the dawn of a new year quickly approaching, I feel compelled to reiterate the need to plan and prepare a budget that will focus on accomplishing short-term and long-term financial goals for 2012. At the very least, I ask you to exit December with January in mind. Close out this financial year with a plan for the next one.
I can't tell you how constructive is to see what you did with your money over the course of an entire year. You'd be surprised by how well your past actions can prepare you to reach new financial heights in the future. Believe it or not, the realization that you spent over $2,000.00 at Starbucks but only knocked off $800.00 of your credit balance this year could motivate you to change that habit next year. Knowing where and how you've wandered off the beaten the path can help you to become more focused and deliberate with your financial movements in the future.
If you haven't done so already, schedule a financial planning day. This will be a day in the very near future when you'll sit down with all of your financial information (i.e., bank statements, receipts, bill statements, checkbook register), and record them as best as you can. You can do this with pen and paper, using finance software, or even Microsoft Excel. Record your income and expenses by month and tally your totals.
I've provided the following example of financial information for January - May:
| JANUARY | FEBRUARY | MARCH | APRIL | MAY | |||
| Income | TOTALS | ||||||
| Xerox | $ 1,784.00 | $ 1,784.00 | $ 1,784.00 | $ 1,784.00 | $ 1,784.00 | $ 8,920.00 | |
| Logan's Roadhouse | $ 685.00 | $ 720.00 | $ 330.00 | $ 504.00 | $ 435.00 | $ 2,674.00 | |
| Total Monthly Income | $ 2,469.00 | $ 2,504.00 | $ 2,114.00 | $ 2,288.00 | $ 2,219.00 | $ 11,594.00 | |
| Expense | |||||||
| Mortgage | $ 729.00 | $ 729.00 | $ 729.00 | $ 729.00 | $ 729.00 | $ 3,645.00 | |
| Electric | $ 139.74 | $ 145.99 | $ 160.01 | $ 155.77 | $ 133.00 | $ 734.51 | |
| Water & Sewer | $ 48.96 | $ 48.96 | $ 48.96 | $ 48.96 | $ 48.96 | $ 244.80 | |
| Cable | $ 65.00 | $ 65.00 | $ 65.00 | $ 65.00 | $ 65.00 | $ 325.00 | |
| Telephone | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 300.00 | |
| Auto Payment | $ 380.00 | $ 380.00 | $ 380.00 | $ 380.00 | $ 380.00 | $ 1,900.00 | |
| Auto Insurance | $ 104.00 | $ 104.00 | $ 104.00 | $ 104.00 | $ 104.00 | $ 520.00 | |
| Credit Card Payment | $ 75.00 | $ 75.00 | $ 75.00 | $ 75.00 | $ 75.00 | $ 375.00 | |
| Grocery/Household Supplies | $ 200.00 | $ 200.00 | $ 200.00 | $ 200.00 | $ 200.00 | $ 1,000.00 | |
| Eating Out | $ 208.00 | $ 120.00 | $ 132.00 | $ 255.00 | $ 200.00 | $ 915.00 | |
| Gifts | $ 100.00 | $ 240.00 | $ - | $ - | $ 85.00 | $ 425.00 | |
| Miscellaneous | $ 259.30 | $ 236.05 | $ 60.03 | $ 115.27 | $ 39.04 | $ 709.69 | |
| Savings | $ 100.00 | $ 100.00 | $ 100.00 | $ 100.00 | $ 100.00 | $ 500.00 | |
| Total Monthly Expenses | $ 2,469.00 | $ 2,504.00 | $ 2,114.00 | $ 2,288.00 | $ 2,219.00 | $ 11,594.00 | |
What if this was your financial history? Would you be happy with what you see here...more money spent on miscellaneous items than on eliminating your credit card debt, and almost twice as much money blown on eating out than invested in savings? How would you allow this revelation to provoke you to change your habits and priorities for the new year?
Let's say that the above was a copy of your income and expenses, and let's pretend that your regular income and expenses for 2012 will remain the same. Allocating these funds for next year's expenses, I made a few adjustments (see the chart below). By reducing the amount of money you spend on eating out, gifts, and miscellaneous items, you will be able to pay $1,200.00 towards your credit card debt instead of the $375.00 paid in 2011, and your savings plan will increase from a total of $500.00 to $1,000.00 in the same amount of time.
| JANUARY | FEBRUARY | MARCH | APRIL | MAY | |||
| Income | TOTALS | ||||||
| Xerox | $ 1,784.00 | $ 1,784.00 | $ 1,784.00 | $ 1,784.00 | $ 1,784.00 | $ 8,920.00 | |
| Logan's Roadhouse | $ 685.00 | $ 720.00 | $ 330.00 | $ 504.00 | $ 435.00 | $ 2,674.00 | |
| Total Monthly Income | $ 2,469.00 | $ 2,504.00 | $ 2,114.00 | $ 2,288.00 | $ 2,219.00 | $ 11,594.00 | |
| Expense | |||||||
| Mortgage | $ 729.00 | $ 729.00 | $ 729.00 | $ 729.00 | $ 729.00 | $ 3,645.00 | |
| Electric | $ 139.74 | $ 145.99 | $ 160.01 | $ 155.77 | $ 133.00 | $ 734.51 | |
| Water & Sewer | $ 48.96 | $ 48.96 | $ 48.96 | $ 48.96 | $ 48.96 | $ 244.80 | |
| Cable | $ 65.00 | $ 65.00 | $ 65.00 | $ 65.00 | $ 65.00 | $ 325.00 | |
| Telephone | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 60.00 | $ 300.00 | |
| Auto Payment | $ 380.00 | $ 380.00 | $ 380.00 | $ 380.00 | $ 380.00 | $ 1,900.00 | |
| Auto Insurance | $ 104.00 | $ 104.00 | $ 104.00 | $ 104.00 | $ 104.00 | $ 520.00 | |
| Credit Card Payment | $ 350.00 | $ 350.00 | $ 100.00 | $ 200.00 | $ 200.00 | $ 1,200.00 | |
| Grocery/Household Supplies | $ 200.00 | $ 200.00 | $ 200.00 | $ 200.00 | $ 200.00 | $ 1,000.00 | |
| Eating Out | $ 100.00 | $ 100.00 | $ 50.00 | $ 100.00 | $ 50.00 | $ 400.00 | |
| Gifts | $ 50.00 | $ 100.00 | $ - | $ - | $ 20.00 | $ 170.00 | |
| Miscellaneous | $ 42.30 | $ 21.05 | $ 17.03 | $ 45.27 | $ 29.04 | $ 154.69 | |
| Savings | $ 200.00 | $ 200.00 | $ 200.00 | $ 200.00 | $ 200.00 | $ 1,000.00 | |
| Total Monthly Expenses | $ 2,469.00 | $ 2,504.00 | $ 2,114.00 | $ 2,288.00 | $ 2,219.00 | $ 11,594.00 | |
Isn't it amazing what your money can do when you give it a plan and a purpose? That's the goal for the new year - to work our money so that we can appreciate how hard we had to work to earn it and how well we can use it to manage our freedom as we invest in the freedom of others.
If you hadn't been planning to take inventory of your financial past (2011) or prepare a budget for next month or next year, I pray that today's blog post has changed your mind. Ringing in the new year is about celebrating our perseverance and victory over past obstacles with clear intent to move forward towards our utmost, God-given potential in the future. That's what I want for you, and that's what I want from me, so let's get to it and do our part to make sure that 2012 is the best financial year of our lives!
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