Did you notice what happened to JC Penney? It started when the company hired a new CEO who had been in charge of Apple’s retail operations. His name is Ron Johnson and he apparently believed that he could turn JC Penney into an Apple-type store. The problem was that he couldn’t accurately foresee the consequences of this major change, which caused the company to lose most of its customers and is still trying to dig itself out from under the rubble this caused.
If you’ve been budgeting this past year or for even a few months, you should now take a few minutes out of your holiday festivities to reflect on the consequences of your spending and how well you were able to achieve your goals. Here are three tips that could help you jumpstart next year’s budget to make things even brighter.
Review your expenses
If you have been budgeting, you should be able to easily access information about last year’s spending. If you kept everything together, now would be a good time to sort it out so you will better know what you spent and where you spent it. If you haven’t already created categories for your fixed expenses such as your rent or mortgage, auto loan payment and so forth, you should do so. You should also have categories for your variable expenses, which would include your cable, cell phone service, Internet, and utilities, as well as your other household expenses. If you have a problem creating categories for your variable expenses, here’s a list of the major ones that could help:
- Home (repairs and maintenance)
- Family obligations
- Health and medical
- Debt payments
- Investments and savings
- Miscellaneous or discretionary spending
Of course, these are just the major categories. You can certainly add any other categories you would care to use.
One of the most critical categories listed here is discretionary spending. These are purchases you can control. They include everything from a manicure to dining out and from a drive-through latte to a donation to an office party.
The next step
Once you have your categories lined up, it’s time to total them up both by month and for the entire year (or whatever portion you were budgeting). There are two reasons for this. First, this will help you see your patterns of spending and second, you should be able to find at least one category where you could make improvements. You may be able to see patterns that could be anything from a peak in spending in certain months to those dozens of cups of drive-through latte you never realized you had purchased.
Your lifeline is your savings and you should have more than one savings account. If you weren’t able to save as much as you had hoped this year, you should pledge to make 2014 better. Do you have an emergency savings account? That’s critical and it should be at least three months of living expenses set aside in the event you lose your job or suffer some other awful event. Six to nine months’ worth of living expenses would be even better but it’s critical that you have at least three. Do you have just one savings account and dip into it as required? Then you should make creating a separate emergency fund a top priority.
This is where knowing where you spend your money comes into play because it’s where you should be able to see money that could be redirected into your savings. The fact is at least a part of your spending should be in a savings account drawing interest and not in the cash drawer of the store you gave it to. Given this, you need to go back and find those areas where you could cut your spending and add to your savings. Since now is a time of New Year’s resolutions, this would be the perfect time to create new financial goals for 2014. Creating an emergency savings account would be a great beginning but you also need to be saving for college, retirement or that 10-day vacation on Fiji. This means that when you’re creating a new budget for next year you might want to think about setting some extra goals.
Install new financial software
There is an abundant number of smart phone apps and software that could help you get into better shape physically and there are also ones that can help you become more fit financially. Keep in mind that all software is not created equal. You will want a program or application that makes budgeting simpler and not harder. We like Mint.com because set up takes only a few minutes. You can easily add all of your accounts and the software does the rest. It will let you make a budget with different goals and then see your daily progress. It makes it easy to tweak your budget anytime you want or need to. By the time December of 2014 rolls around, you should find it easier to evaluate the year and set new goals.
Mint is great because it takes the difficulty out of budgeting. It can be used on your computer but also has mobile apps for smartphones and tablets. This makes it portable and shareable between devices. We suggest you sign up for Mint today because it’s free and could help make 2014 your best financial year ever.
Other apps worth considering
In addition to Mint there are some other smart phone apps you might want to consider that do only one thing but do it very well. For example, the app Ready for Zero can help you become debt free. The way it works is that you create a plan to pay off your debts. Ready for Zero will then display your payment progress and even provide you alerts when necessary to help keep you on track.
Your bank may have an app that would allow you to check your statements online, transfer money between accounts, pay bills and even track your spending. If your goal is to save money on your groceries, the Coupons App includes a coupon database along with a widget that will deliver daily deals directly to your phone. It also has a barcode scanner that enables you to compare prices and when you have a coupon all your have to do is show it on your phone when you check out at the register.
Finally, there is SigFig, which is a good introductory app for investing if you’re just getting started. It puts all of your investing information together in one place and offers advice that could help you save money on hidden fees or bad investments.
I am an associate at National Debt Relief, which is a Debt Consolidation Company that has helped thousands of Americans facing credit card debt problems. We help with debt settlement, debt management, and other debt related financial crisis' facing consum