Jean Chatzky
Do one thing: If you don’t have a budget, the new year is a great time to create one. Go online and search for ‘personal budget’ or ‘household budget’ to find a plan that works best for you.
Follow the Money
A good way to ensure you know where your money is going every month is to create a budget and do your best to stick to it. So it only makes sense that you also need to check in on that spending plan on a regular basis to ensure your finances remain on track.
Keep Trying
If you have tried and failed at budgeting a dozen times, it’s okay. Consider this your sign to try it again. Besides, budgeting doesn’t have to be complicated and can be much less stressful – and more empowering – than you think. Certainly less stressful than looking at your checking account balance and wondering how it went from plenty to empty in just a few days.
Review Budget
As a new year beckons, it’s smart to review your finances to figure out if you were able to follow your budget. That way, if things haven’t gone exactly as planned – say you spent way more than you budgeted for in one or more categories – you can make some adjustments right now to set yourself up for a successful new year for you and your money.
Utilize Online Banking and Credit Card Statements
How long your budgeting review process can potentially take depends on a few things:
- Whether you already use an app or online budget that creates spending and savings reviews.
- Number of checking and savings accounts you have.
- Plus the number of credit cards and other payment methods you use that may or may not be tied to those accounts.
Pro tip: One easy way to go over your spending and year-end budget is to use what you already have. Some credit card accounts categorize spending on statements (and online) so cardholders can see where they spent among categories such as food, housing, entertainment, medical care, etc. If you use a card with that feature for a majority of your monthly financial transactions, that could be a quick way to see where you stand budget-wise.
A Reverse Budgeting System Can be Simple to Review
Certified financial planner Filip Telibasa, who owns the firm Benzina Wealth, is an advocate of reverse budgeting.
- What is Reverse Budgeting? Setting aside a specific amount into savings every month or pay period first, then designating the rest of your after-tax income for needs and wants. (Your needs are things like rent, groceries, and gas. Examples of wants include eating out, attending concerts, and other extras you don’t need to get by.)
“By having this in place,” Telibasa says, “you can then easily track a budget via cash balances as those should stay flat over time. If, instead, (your) cash goes up over time, that means you can spend more. If it goes down, then you need to take a closer look and decrease the amount you are saving or spending.”
Tips for Making Future Budget Check-ins Easier
When it comes to budgeting and cash flow management, Zack Gutches, a CPA and lead financial planner at Truerichesfp.com, says he guides clients to separate where their money goes.
- Income Account. Where all your income goes first.
- Expense Account. Where their expenses are paid.
- Money Flow. Set up automated transfers from the “income account” to the “expense account” each month to pay all expenses.
“Separating like this makes it very easy to quickly tally up your income or expenses for any period of time,” notes Gutches, “and eliminates a lot of the noise when all income, expenses, charitable gifts, and savings are coming into and out of one single account.”
Regularly Scheduled Communication
While year-end checkups are a good idea, many financial experts say you should track your spending and saving much more frequently, especially if you are new to budgeting. Charles Thomas, a certified financial planner and founder of Intrepid Eagle Finance, encourages clients and their families to meet frequently to talk about spending, as often as every two weeks. “The biggest mistake I see people make, especially spouses, is to only discuss spending/budgeting when something has gone wrong,” notes Thomas.
Plan to Review
Instead of waiting until an emergency pops up – and it will – he says to go ahead and plan to sit down together to review your budget once or twice a month, explaining that you should “look at what’s happened recently and what’s coming up in the next few weeks. Don’t wait until a problem occurs to communicate.” In other words, if you know you’ll have an unexpected expense that hasn’t been included in your budget, discussing ways to cover the cost beforehand can lead to fewer headaches down the road.
With reporting by Casandra Andrews
Chris O'Shea
