The start of a new year is often when we tell ourselves “This year I am going to [insert resolution here].” Maybe last year you decided to really start tracking your expenses (you know, with a budgeting tool, like Mint.com or Quicken). With the busy holidays now behind us, have you taken a look at your expenses for 2014? Or have you forgotten about your budget entirely?
While many of us do not consider budgeting to be even remotely exciting, it is one of the most important things we can do to understand where our money goes and figure out ways to either spend less, save more, and/or plan for goals throughout the year.
Whether you have been tracking your budget for a few months or for a few years, now is the perfect time to re-examine it. Take some time to align your monthly estimated budget and actual spending. Are your monthly budgets higher than your targeted annual expense number? Are you really spending as much as you anticipated on items such as transportation or utility costs? You may find that some of your targets need to be readjusted, either increased or decreased, depending on changes in your lifestyle.
It may also help to take a look at your current expense-tracking categories and see if you can condense any to better capture the broader picture. We recommend tracking wide-ranging categories such as ‘Food and Dining’ and ‘Utilities’ rather than breaking down ‘Fast Food’ and ‘Coffee Shops’ or ‘Cell Phone’ and ‘Internet.’ In the long run, your total regular expenses are what is most important. (We like to call these expenses ‘lifestyle expenses’ or expenses that will occur on a regular basis to maintain your current lifestyle).
We understand that everyone’s situation is unique and some households require more categories than others. Some households may want to trim expenses, and separating out the smaller categories for a short amount of time can help you see where money is being spent.
If you are interested in reducing expenses in one particular area, try setting both a timeline and dollar-savings goal, and then, consistently monitor your progress. Once your goal has been achieved, readjust your budgeting categories to see the big picture again.
The start of the New Year is also a great time to update (or begin) a financial plan. For our current clients, we are more than happy to assist you with both setting up and monitoring Mint.com accounts. Contact us to learn more about the ways in which we can to help you not only track your expenses, but also help plan for your financial goals along the way.
