The time between December 26th and December 31st is when I typically review my finances for the year, spend some time reflecting on what I have accomplished and what didn’t work very well for me. This information is useful as I prepare the Spending Plan for the upcoming year, update longer-term goals, and set new goals.
Start out by reflecting over the past year. Get a page of lined paper and think over the last 12 months. Go month by month, using your bank and credit card statements and previous yearly plan if needed to jog your memory. When you did well, and even when you weren’t doing well financially, think about what was going on in your life during those times. Was there additional work-related stress that you were dealing with? Did you have unexpected expenses pop-up that you had to scramble to figure out how to pay for? How about your emotional well-being? Were you using retail therapy to make you feel better? These are the kinds of questions you should be asking yourself as you go over what you spent in the past year.
Total up the amounts you spent in differing categories for the year. Think of rent or mortgage/housing costs, utilities, groceries, vehicle costs (auto loans, insurance, maintenance, gas, etc.). Tally up what you spent for debt payments (credit card payments, line of credit, etc.), dining out, internet, cellphones, subscriptions for your gadgets, everything you spend money on.
Now do the same for any saving you do – pensions, Registered retirement savings plans, tax-free savings accounts, regular savings accounts, etc. If you saved up money in a sinking fund for a planned purchase and used those funds in the same year, include the amount in the appropriate spending category instead – it isn’t savings if it spent in the same year as it was accumulated.
Do the same with your income – figure out how much money you had coming in over the entire year. Include everything – employment income, unemployment income, any social benefits you receive (Child Tax payments, GST, etc.), monetary gifts from family or friends, side gig pay, anything that puts money in your account or hands.
Do the numbers surprise you? I bet they do. The reality of this part of the process is to open your eyes to how much you are spending, and what you are spending it on. The reality of the current economy is that we are spending more money than we should on living – housing, utilities and food. Generally, we are also spending more money than we make. Almost every single person I know is in debt, some more than others.
In your reflection time, keep a list of what you want to accomplish in the coming year, both personally and financially. Some ideas are putting money toward your retirement, buying a new appliance, getting out of debt, spending more of your time toward activities you enjoy, etc.
Once this is done, you will be ready to start prioritizing your goals for the coming year. Using this strategy, you can have a better focus on what you really want for your life. The time will pass either way.
