Top New Year's Resolution: Manage Your Money!
Posted on January 3, 2014
It’s a new year, and millions of people have made resolutions.
Lose weight. Quit smoking. Travel more. For many of us, though, our resolution is to manage our money better, to spend less or to spend more wisely.
Getting Started
The first step in gaining control over your personal finances is understanding your cash flow – identifying what money is coming is and what money is going out. This early stage in the budgeting process isn’t about making changes, it’s simply about learning how much money you have and how much you need to meet your commitments and live your life. Keep in mind that unless you’re single, you should identify income and expenses for your entire family.
It still might feel scary, but improving your financial management starts with having accurate information about your income and expenses, so get out a pen and paper or open up a spreadsheet program, and get started.
Money In
Listed below are some of the most common sources of income. Identify all the sources that apply to you and how much you receive, estimating realistically where necessary:
- Wages: Here you’ll need your net income - the money you actually receive after paying federal, state and local taxes. .
- Tips: These will likely vary, so calculate an average over the past few months (And if you haven’t been keeping track of your tips, it’s important that you start!)
- Commissions and bonuses: You’re trying to get a handle on your actual income, so be realistic, even though it might be tempting to estimate what you might earn if everything goes perfectly.
- Child support and alimony/maintenance.
- SNAP (Supplemental Nutrition Assistance Program) benefits.
- Disability, social security or unemployment payments.
- Annuity, trust fund, interest payments.
Where are you spending your money? Write it down, including both the payments you need to make and the money you choose to spend. (If you’re not sure, estimate for now but start keeping track.) Common expenses include, but certainly aren’t limited to:
- Home: rent/mortgage, insurance, utilities (heat, water, electricity, television service, internet), services (house cleaning, lawn care, window washing, tree trimming, etc.)
- Communication: landline, cell phone, data plan, internet
- Childcare: day care, school, enrichment classes (tutoring, dance, karate, soccer, etc.)
- Medical: doctors’ visits, prescriptions, dentistry and orthodontics, chiropractor, massage
- Food and drink: groceries, restaurants and bars, coffee shops, home delivery
- Car: monthly payments, insurance, gas, maintenance (oil change, cleaning)
- Entertainment: movies (theaters and Netflix, Red Box or On Demand rentals), classes, crafts, activities (bowling, golf, amusement parks, ski passes)
- Child support and alimony/maintenance.
- Debt: credit card payments, personal loans
- Pets: food, veterinarian, prescriptions, pet sitting/walking/grooming
- Other: clothing and shoes, home improvements, gifts (birthdays, holidays, weddings, donations)
There it is, your cash flow: money coming in and money going out. Great job! You’re on your way to gaining control over your finances.