Goal ! ! !
Christmas is over and the New Year begins in just a few days. It is that time of year when our hearts and minds turn to setting ‘resolutions’ which we often forget by Valentine’s Day! Let this year be the exception and set not a single resolution, but rather set some goals for yourself and your family. Set goals that will improve your standard of living, your health and help you be better prepared for what looks like a bumpy financial ride for all of us!
Before setting a single goal, it is important to know where you are right now. Think of setting goals as the same process you would use when utilizing a GPS system. First, you have to know where you are in order to get directions to where you want to go. Today, let’s focus on financial well being and your ability to weather financial storms ahead.
Your starting point must include your current income, which should be easy to figure out. If you don’t know your gross and net take home pay, ask your employer to provide a year-to-date summary for you. Look at that summary and see what you currently have taken out of your paycheck. Are your IRS deductions reasonable? Did you pay a great deal of income tax last year when you filed your return or did you receive a larger than necessary refund? Although lots of folks LOVE getting those refunds, they are actually interest-free loans that you have granted Uncle Sam. Be realistic and consult a tax expert if you have questions.
Next look to see if you are taking advantage of the benefits provided by your employer without being over-insured or paying for benefits that you aren’t using. Do you take advantage of 401K contributions matched by your employer? What about a pre-tax health savings account–which is only worthwhile if you actually use the full amount every year! And don’t forget pre-tax childcare expense accounts.
Now you know how much you make. Do you know how much you spend? Do you know how much you owe others? Take a cold hard look at your spending habits by pulling out (or accessing online) your previous bank statements. Who is getting the bulk of your money? Is there a fair amount of cash unaccounted for?
If you haven’t already done so, write down every single mandatory monthly payment that you must make. Don’t forget mortgage, insurance, student loans, debt in any form, utilities, TV, phone, internet, tuition, cars, etc. This first category should include only those expenses that are set each month.
The second category will be flexible expenses such as savings, clothing, food, gas, donations, travel, entertainment or gifts. If you don’t know how much you spend on these items, it is likely that you are using cash. That isn’t bad, but it can be difficult to track what you spend. For the next few weeks, write down anything you pay cash for and calculate that into this category. Be brutally honest or the exercise will be pointless and you will not know where you are beginning from!
Add up these two categories and see if you are running a deficit. If you aren’t, you should be saving every month and never having to worry about when the next payday is. But, if you have loans that you must repay or are carrying a balance on any credit card, you are still experiencing deficit spending–just keep that in mind as we proceed to decide where we are right now!
You should have a fairly clear idea at this point if you are living within your means, way above your means or (the best of all possibilities) BELOW your means and saving the difference.
For those of you living below your means–good on you! You know what you make, what you spend and are saving your hard-earned money. You now only need to decide if you are taking advantage of all possible tax benefits, investing your money wisely and where you want to be in the future. Are you on track for goals one year, five years, ten years and twenty years in the future? Are you utilizing your common sense and self-discipline to be prepared in other areas of your life? Are you enjoying life–are there things you would like to do or to acquire? Do you have a plan to accomplish those wishes (you probably do, but it never hurts to check)? Do you know what you could cut from your budget immediately if need be? Do you know exactly how much money you have to have on a monthly basis? Set your goals based on the answers to those questions, and keep reading just in case you can learn something new. Or post your suggestions to everyone else!
If you are living just within your means, go through the following exercise with those living above their means. You are failing to get ahead and truly prepare yourselves and your family. Should you hit a ’speed bump,’ your security will be threatened. Now is the time to re-appraise, cut back and save, save, save, save. Acquire no new debt, pay off any that you have as quickly as you can and strengthen your overall level of self-reliance.
Those of you in a serious deficit spending lifestyle need to stop–RIGHT NOW!!! If you are consistently spending more money than you make, it is time to swallow a giant dose of self-discipline and take off those rose-colored glasses. Put your credit cards away, analyze the living daylights out of that budget and start cutting TODAY!! Not tomorrow, not after the holidays are over, not after that big family reunion, not after your teeth are whitened, etc, etc, but NOW! Take a cold, hard, self-reproaching look at those expenses you have written down and face the facts head on:
Do you have cable TV? Cancel it today.
High speed internet? Cancel it today.
Eating out (and that includes stopping for a soda or a candy bar out of the vending maching)? Stop today.
Giving generous gifts? Stop today. Make something simple or just send the person a well thought out and meaningful letter.
Buying new clothes? Stop today. Use what you have, shop clearance racks, garage sales, thrift stores and freecycle.org for items you really have to have.
Having manicures, pedicures, massages, spa visits? Stop today.
Insisting on designer labels? Get real!!
Eating prepared, over-priced and nutrionally challenged foods? Learn to cook! It isn’t hard, really it isn’t!
Renting movies or paying for Netflix? Stop it…the library offers a wide variety of DVD’s for free.
Paying for a zillion and one activities for your children? Stop and send them outside to run around. Take them to a free playground or one of the many free museums around you. Give them some paper and crayons or even better scissors and glue! Read a book, play a game or just talk to each other.
Going to the movies? Please, wait for the DVD at the library.
Buying books? Again, the library and that goes for magazines as well.
Driving around burning up gas? Consolidate necessary errands (first you have to learn what is really necessary & needful) and save gas.
Need something or have something you don’t need? Try freecycle.org or craigslist. You might be surprised what you can give away or get for free.
Bartering is a good thing, too.Can you exchange mending, child tending or gardening for Junior’s piano lessons? Save your cash and exchange your skills.
Eating fancy meals, even at home? Learn to cook and enjoy staple, inexpensive foods high in nutrition and low in fat.
What about prepared snack foods? String cheese, chips, cookies, candy–all high in calories and low in nutrition. Pop some popcorn or make a batch of nutritious cookies from your food storage. Cut up a chunk of cheese. Stick snack foods in ziploc bags before you leave the house so that you won’t be tempted.
Is your home over-heated? Turn that thermostat to a reasonable level. Turn it down even further at night and put a sweater on in the daytime! Close the curtains, plug up drafts and wear warmer clothes.
Utilities sky-rocketing? Turn off lights, electric appliances and other energy-sucking items when not being used.
Batteries eaten up by gadgets? Either use re-chargables and/or cut down on the gadgets.
Cell phone bills silly? Ask yourself–do you really need one? Is Junior texting everyone on the planet? Does Junior even need a cell phone? Are you using up or paying for too many minutes?Will your employer subsidize your cell phone?
Shopping for fun? Try going for a walk, reading a book from the library or visiting a friend. Shopping = spending = more debt = more stress = no fun at all.
You get the idea, don’t you? Slash all discretionary spending and pare down even ‘necessary items’ to their barest levels. Pay off that debt NOW! Keep telling yourself that nothing tastes as good, looks as good or feels as good as being out from under the load of debt and uncertainty. For anyone living below their means or just at their means, this should be your first goal of the year–control spending, cut anything unnecessary, pay off debt and save something! Set weekly, monthly, quarterly and yearly goals. Keep close record of how you are doing and pat yourself on the back as you accomplish each goal. You’ll like yourself and each new day much more when you are financially free.
For everyone else, you might want to do the same analysis of your spending to be certain you know where you are spending your money. Analyze exactly what you would have to have to live if your income was slashed. Also, set goals for those things you want to do with your money this year. Write those goals down and divide them as explained above.
We have all heard and should all have internalized that we are collectively facing an economic upheaval. No matter what your income, your profession or your situation, we are all likely to be affected by what promises to be a rocky ride. Fasten your seatbelts and prepare!
