Taking Control of Your Finances

The end of the year is a perfect time to take a look at your financial picture and see what you might want to change in the new calendar year — not to mention getting a head start on your taxes.

Over the holidays, my husband and I sat down with a legal pad, a calculator, several pencils and a stack of bills to figure out exactly how much money we’re spending, what we’re spending it on, and where we can save a few bucks.

We divided our expenses into categories, came up with CURRENT and BUDGET spending amounts for each, and calculated the difference between our current spending and what we want it to be. Here’s a list you can use to do the same thing:

1. Mortgage/rent
2. Groceries
3. Electricity
4. Gas
5. Water/sewer
6. Household maintenance
7. Health insurance
8. Life insurance
9. Car insurance
10. Car payment
11. Personal property tax
12. Gas/public transportation
13. Personal property tax
14. Internet/telephone
15. Cable/satellite
16. Entertainment
17. Credit card debt
18. Vacation/travel
19. Miscellaneous
20. Pet care

Our actual list had a few more items on it (including Netflix, XM Radio, ADT security monitoring, and my business expenses), but everything fit into these categories. We scoured our bank statements and receipts for the actual numbers, took a few minutes to start breathing again when we realized how much money we spend on CRAP every month, and then worked out a strategy.

• We’re consolidating to a single checking account and a single savings account (plus my business account) instead of each having our own.
• 10% of every check goes straight to savings.
• 2% of my husband’s check is marked for his motorcycle fund.
• 13.95% of my check is for taxes (because I’m self-employed and have to take it out myself).
• We halved our entertainment and “miscellaneous” spending.
• We doubled our credit card and other debt payments (except student loans, which will still get the minimum payment because the interest rate is so darn low).
• We’re selling both of our cars and purchasing cheaper vehicles with lower insurance and lower payments.
• Our goal is to be ready to go to the accountant for taxes the week after all of our W2 and 1099s come in.

Now, we know how much we earn, how much we need for living expenses every month, and where we can cut to save some money. We also have a savings plan in place, which is particularly important since we want to have kids and need that safety net of extra money (and college savings, but that’s a terror I don’t want to deal with for a few more years).

This weekend, we’re working on more strategies for reducing expenses (like planning meals, limiting eating out, using coupons, turning off lights, lowering the thermostat, stuff like that). And the crazy thing is, I’m really excited about it!

Having goals in mind makes it easier to get where we want to be. And it’s gotten me more excited about setting goals for my own business.

How’s your financial health? How can you improve it in the new year? Leave a comment.

Contents © Copyright 2007 Kristen King

(photo via SXC.hu)

Tags: women and business, finances, managing your money, financial health, budget, savings