It’s the end of year, which means it’s time for all those goals to be written and New Year’s resolutions to be made. But, have you figured out your plan for the New Year when it comes to your budget? I mean, sure you know you want to become debt-free or that you want to take a family vacation sometime during the next year, but have you actually sat down and made out your plan?
For instance, we already know that we have two trips planned as a family for next year – visiting my brother and his family at Camp LeJeune and visiting my mom’s family up in Cleveland, OH for my cousin’s wedding. We also know that we are in fact, planning to put both the boys back in preschool next year as well as we know how much more money we need to save towards our fully-funded emergency fund and we know how much extra we need to apply to our mortgage in order to get it paid off.
Okay, so all that’s great and awesome to know all of these beforehand, but how do you make it all happen? I mean, I just literally spouted off that we’re intending on paying about $50,000 in the next year….
Well, here’s the thing we have to plan. We have to realize and understand that we can’t possibly build up our emergency fund and pay off our mortgage aggressively all at the same time. Therefore, we have to pick and choose and that not everything will be met next year, and that’s okay.
Determining Your Goals
I always start off with asking, “why is money important to us?” The reason why I ask this is to get us thinking about which goal is more important – the fully-funded emergency fund or paying off the mortgage.
Now, this doesn’t mean we can’t contribute something towards both goals simultaneously, it just means that one will be our primary goal while the other is slowly being tackled.
You notice I didn’t ask “which one can we make happen faster” right? Because fast isn’t part of the plan. The plan is to complete Dave Ramsey’s baby steps 3 and 6 within the next 18 months so we have to ask ourselves, which one is more important.
Right now, for us, it’s the emergency fund. We’re a little over halfway there now and if we’re aggressive we can meet our goal of having a fully-funded emergency fund by the end of next year.
Related Post: 3 Steps to Determining Your Financial Goals
Save to Pay Cash
As I mentioned before, we have two family trips planned not including the business trips that I have planned for next year. This simply means that now we have to account for these trips within our budget because we don’t have any credit cards we have to save up the cash in order to pay for these trips.
That requires us to start saving up for these trips now by automatically withdrawing the money every week from our checking account into our savings account. I even do this for my business trips. I save a certain amount from every payment received to be applied to my business trips.
Related Post: How to Create a Budget for Your Blog
Yearly Expenses
Every year, we have certain expenses that are only paid once a year. For us, those are my life insurance policy, our Ad Valorem tax, and our Amazon Prime membership. We have to determine how we’ll budget for these expenses – a little every month towards the yearly expense or have the total expense taken out of the due date’s monthly budget?
We chose the latter only because it became too complicated to hold that money aside for a year – it would usually get absorbed somewhere else in the budget. So, now when October rolls around, we know that we have to account for the $99 Amazon Prime membership fee. It’s not a surprise, it’s written with our yearly budget so we know about it well ahead of time.
We also take this time every year to review our expenses – are we paying too much for certain services? For example, our trash bill just went up again (another $10!) so now we’re looking for another trash service. When we started with them our bill was $35 every three months and now it’s $59 every three months!
Insanity.
Same goes for our insurances. We go over our policies and determine if there is any way to reduce those prices. We do this every year and it saves us so much money come the New Year.
Related Post: Save $500 a Year without Changing Your Lifestyle
If you haven’t already had your yearly budget checkup, I encourage you to go ahead and get it done! This way, you can start the New Year off on a great start!
How to plan your budget every year?
Love this! Important stuff to think about, and you are SO right about needing to figure it out now, come up with a plan to make our financial priorities happen next year, and then WRITE THEM DOWN! And then of course sticking to our plan…but that’s the easy part, right? LOL For your fully funded EF, are you going with 3 months, 6 months or something in between? We are sort of doing the baby steps out of order, but it works for us. Because we still have a car loan to pay off, we are working right now on a 3-month EF and then will tackle the car loan and one other very small loan that we were forced to take out to use as a down payment on our home. Down the road I would like to increase the EF to 6 months. But for now, my hubby and I both feeling comfortable having it at 3 and then getting rid of our other monthly payments!
Our goal right now for our EF fund is $10,500 that will be 3 months of husband’s income – we do plan to increase it to $20,000 but that will be after the mortgage is paid. 🙂
First off, I’m in the Cleveland area! Enjoy it while you’re up here! 🙂
We started FPU last February so this will be our first “new year” on the budget plan. It’s funny that you pointed out the items you only pay once per year, those always seemed to throw us off even though we knew they were coming…insurance premiums, license plate renewals, dog tags, Amazon Prime, etc. We made a separate sheet on our Excel budget file for annual expenses with the date next to them. I always make sure to glance over each month to see if there’s anything I need to add.
One of the things we are doing this new year is shopping around for different cell phone plans and insurance quotes. We are FINALLY out of our contract with a major phone company so we are pricing different carriers as well as the no contract option.
We are still working on Baby Step #2, at gazelle intensity. We make a combined $95,000 per year before taxes and $75,000 after taxes , which sure sounds like a lot…but I have almost $100k (cringe) in student loan debt, plus we have a vehicle and some small consumer debt. Our plan is to continue the debt snowball and at the end of the year – be putting a total of $2000 per month on student loans.
Thanks for lighting the fire under us all to make and more importantly follow our plans 🙂
LOVE that you are hitting baby step 2 with such intensity Savannah! Do you follow Natalie of Financegirl? She’s in the same boat as you with student loans and I love reading about her progress! 🙂
Wow – I called around and the best price I could get on trash/recycling was $21 per month!
My primary financial goals for 2016 are to avoid all debt, repay our remaining car loan (about $2800), and to increase our emergency fund.
We haven’t even started calling around yet. It just seems to go up $10 every bill cycle which is a lot in my opinion especially since gas prices have dropped. I love your goals for 2016 – avoiding debt is a toughie. Even though all our consumer debt is paid for, it’s still so tempting to want to sink back into debt.
We’re in the middle of planning our 2016 budget and financial goals right now. It’s going to be a crazy year!
Goals and a vision are huge for me. I’m actually talking about that on my blog today (tis the season). I think you have to plan it out, otherwise you are reacting. That’s not to say don’t be flexible and take on new opportunities, but still have a plan that’s your go-to. For me, my plan is to get all of my follower and subscribers up to 10k, pass the CFP exam, and ultimately make $5k / month from my blog. Fingers crossed!! 🙂
My blog money goal is $5,000 a month too for 2016 – great minds think alike! 🙂 And you’re totally going to rock the CFP exam – I mean you passed the Bar exam, this will be a piece of cake compared to it! 😉
I’ve got my one big goal sorted for the year but I do need to put some thought into planning my budget/debt repayment/saving for the year, too. That might be a good activity for new year’s day.
Good luck with your goals for 2016!
Thank you so much Diane! 🙂 Good luck on your goals!
When I am asked “how do I prepare a budget” or “how do I save money” I always say start by advising writing down everything you spend all day and look at in the evening. And then plan what you need to spend tomorrow (ie prepare a one day budget). Do that every day for a week then prepare a daily budget for next week. And then do all that again the next, and the week after. At every step ask why this or that item is being purchased.
Why? Because I figure expenses flow from activities and habits and lifestyle choices. The financial recording and budgeting is simple. (Maybe I think that is easy because I am an accountant?). It is the psychological changes that are hard, really hard.