December 2010

We just wanted to say that we would be taking the next couple of weeks off for a holiday break. We hope everyone has a Merry Christmas and a Happy New Year!

Expect our next post on January 3, 2011!


If you haven’t done so already, December is the time to review your budget and plan ahead for the coming year. If you set aside an hour or two in the next couple of weeks to review 2010 and plan for 2011, you won’t regret the time spent away from the busyness of the holiday season.


Review 2010

Look back at you finances from 2010. If you had a budget, compare what you actually spent to your budget. Did you track close to your target? Don’t get too caught up over a few dollar here or there, but if you see any major discrepancies (spending hundreds of dollars more than you planned for), those are the areas that will need some tweaking for 2011. If you’re on target with your budget, that’s great!


While looking back over 2010, think about any changes you would like to make. Is there something that you’re currently paying for that you no longer want or need? Has something changed in your life that makes a new expense important? These are the things you will need to decide while planning for 2011.


If you have never set up a budget for yourself before, now is the perfect time to do so. Please read our previous post on some ideas on how to get started.


Planning 2011

If you hit your budget for 2010 and don’t feel the need to make any additional changes, before finalizing the same budget for 2011 you should still consider any cost that you may not have accounted for (i.e. potential higher rates for utilities, insurance, etc.). Then, if you feel comfortable with how everything looks, you have a plan for your 2011 budget that you can feel comfortable with.


Unfortunately, this often isn’t the case. Budgets are very much a “best case scenario” and your actually expenses don’t always come in very close to target. So, if this is your situation, you’ll need to make adjustments.


If you have a non-essential expense coming in at more than you budgeted, like your entertainment or hobby allotment, make it your goal for 2011 to cut back to hit your targeted number. It can be a simple matter of paying closer attention to your expenditures on a monthly basis so you don’t over do it.


If you are spending more then you budgeted on the must haves, it’s possible that you were unrealistic in your amount (you thought you could get by with $40 a week in fuel but you actually need $50). If this is the case, then readjust the numbers to a more realistic target. Then, if you have to, compensate by taking that needed amount from elsewhere (often from non-essential expenses).


It’s also possible you came in under budget in a category. If you spend significantly less than you budgeted, and you are comfortable with what you spent, shift those dollars elsewhere where you need them.


If your situation is uncomfortable and you feel like your expenses are too high, you may have to consider reviewing your cash flow and deciding if you need to make any major changes or cutbacks in your expenses.


Again, December is a great time to do this whether you have a previous budget to review or you are starting from scratch. Start the New Year off with a realistic plan to help you make decisions throughout the year.

Last week, I (Dawn) was reading a post at my favorite personal finance blog The Simple Dollar authored by Trent Hamm. The post is called “Out with the Old, In With The New: Create a Five Year Sketch,” and I thought the ideas would be a good complement to our previous discussion on setting your financial goals.


The post is the second in a series about how to prepare for a great 2011. It emphasizes that looking ahead at the next five years and deciding now how you want your life to look can really help you decide what needs to be done today to make that happen. But make sure to be realistic (we would say it’s okay to dream big, but set realistic/obtainable goals). And this isn’t just about your financials. Take a look at your life as a whole and think about the following (quoted from The Simple Dollar):


“What will your job be like?
What will your family be like?
What will your physical appearance be like?
What will your home be like?
What will a typical day be like?
What will you be looking forward to?
What will your social circle look like?”


As we talked about in our financial goals post, having your goals planned out and written down where the can be reviewed can really go a long way to help you achieve what you set out to do. That way, you can always go back to track your progress and decide what needs to be done next. So, even if in five years you haven’t reached every goal you set for yourself, you’ll definitely be much better off than you would if you hadn’t thought about your goals at all. Plus, it can be fun to think about all the possibilities the future can hold.