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Personal Budgeting Checklist for the Start of the New Year


The New Year always brings excitement, inspiration, and usually resolutions and goals.  I know this because our gym is now twice as busy this week than it was last week.  Before you get started running down the New Year path already, it’s important to close out your previous year, especially from a financial standpoint.  Here are our recommendations for reflecting and maximizing your year.

Close Out the Budget for the Year

After December 31st, you’re able to close out your December budget and see where you ended up for the year.  This is always a fun time for Rachael and I because we get to see how much progress we made towards our savings goals and our investment goals.  Money isn’t everything, but it’s a pretty easy way to measure progress towards a variety of goals.

Here are a few things we look at when closing out our budget:

  1. Were we under or over budget for the year?
  2. If we were over, why were we over?  Do we need to budget more in certain areas or cut back?  If we were under, did we budget too much in certain areas or did we just do a good job?
  3. If we were over, by how much and where is that money going to come from? (most often, it has to come from savings, but if you got an end of year bonus at work, sometimes that can wipe out your overage)
  4. Make your transfers.  If you follow our “secret money saving strategy“, you’ll certainly have extra cash built up in your checking account that you can transfer to savings.  And if you use the same structure for your bank accounts that we do, you’ll have even more to transfer from short-term savings to deep savings.

Review Your Annual Budget and Make Adjustments

Now that you’ve had a chance to see if you were over or under budget for the year, you can make some adjustments for the new year.  Do you need more spending money for food?  Or do you have some big trips coming up – maybe you need more in your travel budget.  Based on how you did the year prior and what you have coming up, you’ll want to make both necessary and desired adjustments.  If you got a raise, maybe you want to put some of that towards extra shopping budget.

A word of caution: we always recommend that if you get a raise you try to put at least half of that towards savings or an investment category.  Use the remainder to increase some of your monthly budget items like eating out, entertainment or shopping.  This will ensure that as your income grows, so does your savings.  And you can still increase your lifestyle, but you’re paying yourself first!

Set Aside Money for Taxes

Depending on what you claim on your W-2’s you may be in for a refund or you may owe money at tax time.  Rachael and I prefer to owe money so that we’re putting our money to use throughout the year rather than letting the government hold onto it all year.  Really, the goal is to be very close to $0 one way or the other.  Regardless, we usually end up owing, so we make sure to earmark some of our savings for paying taxes.  We estimate it based on the year prior.

Max Out ROTH/IRA/401K Contributions

There’s still time to max our your investment accounts.  Typically you have until tax day to take advantage of these.  As an example, the 2016 ROTH contribution deadline is 4/15/17.  This is helpful because it allows you to settle up all your personal accounts, see what you have in your savings account and then decide how much you can contribute.  If you’ve been contributing all year, you may not have much left to max these accounts, but it’s typically to your advantage to do so.

Compare To the Prior Year

One last thing that Rachael and I like to do is compare how we did to the previous year.  We record our two checking account balances and our two savings account balances so that we know how much we put into savings.  It also allows us to see if we saved more money or less money than the year prior.  The goal is to always have that number be higher.  Obviously, certain life events happen and that’s not always possible, but if you strive to save more and more each year (when I say “save”, I mean save and invest), you’re putting your future self in great shape.

Do you do these at the end/start of each year?  What’s your process?

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