Financial Planning: New Year, New Goals
December 31, 2010Year end is a perfect time to take a look back at the progress you made in your financial life in 2010 and set new goals for 2011. So many New Year’s resolutions fall by the wayside by St. Patrick’s Day. (Dialing back on the chocolate consumption makes my list EVERY year. Still, there’s something about dark chocolate that is stronger than my resolve.) There are some resolutions, though, that are not only good for you but sustainable. And, maybe a bit more realistic than my dark chocolate resolution too.
I recall talking with an acquaintance this time last year and she was having some financial difficulty. She and her husband had just bought a new car because their old one had over 250,000 miles on it. They paid about $4,000 more than they had budgeted after they fell in love with one particular car. They had also renovated a bathroom and the costs ran higher than they expected. And, they went “a little overboard” (her words) on Christmas shopping (using credit cards). In isolation, none of these issues would have been an issue. The combination of all three things made them feel very constrained, almost overwhelmed once the dust settled and they looked at the monthly expenses after their winter spending spree.
She made a New Year’s Resolution to get her spending under control and to, for the first time in her life, understand where her money went and to see her financial “big picture.” Her guiding principle was always “I have a good job and make enough money to spend what I want to spend and I’m not extravagant, so it’s not a problem.” Her husband was more fiscally conservative and this difference was starting to put stress on their marriage.
After some conversation with both of them, we sat down together with the goal of organizing their financial life. We used this financial organizer in order to help them see the big picture – what they own vs. what they owe. They had never put everything on one page before, so this was enlightening for them and probably not in a good way. They thought they were much further ahead than they actually were. We also used a combination of this expense tracker and an online tool (Mint.com) to help them get a firm understanding of where their money goes each month. They made a promise to each other, and a New Year’s resolution, to work as a team in 2010. Their goals were to reduce their debt, maintain spending discipline, and to update their financial worksheets on the first weekend of each month.
I saw them while I was Christmas shopping this year and asked how their resolution from last year is going. They smiled! They have been able to stick to the plan and they now do their monthly “financial meeting” at a local breakfast hot-spot. It’s become a “no kids” breakfast date that they look forward to and I have never seen them look happier.