Now that the year is coming to an end, it’s a perfect time to sit down and go over your budget. A good budget review gives you a chance to go over your 2014 financial results so you can see how close you came towards meeting your annual goals. It’s also an opportunity to prepare for 2015 and make next year even better. To get the most out of your end of the year budget review, here are a few tips to keep in mind.
Collect and review your budget information
Before you can analyze your budget, you need to gather your 2014 financial information first. If you were really organized this year, you’ll have kept track of all of your spending throughout the year. Most of us aren’t that organized, but it’s OK. It’s pretty easy to look up your big monthly expenses like your rent/mortgage, your car and insurance payments, your cell phone bill, and your utilities. If you’re already using a budgeting tool like Mint, you can easily track your expenses.
For expenses that change every week, like groceries and entertainment, try to estimate how much you spent on average each week so you can gauge the total amount of money that went to these categories. Once you have all this information in front of you, you can see where your money went throughout the year.
How do your 2014 results compare to your goals at the start of the year? Did you hit your savings goals for the year? Did you spend more than you wanted to? Did you run into any unexpected financial problems throughout the year that derailed your plans, like surprise medical bills or car repairs? Go through every part of your budget as critically as you can and identify the weakest parts of your 2014 results. These are the parts of your plan that you want to start fixing in 2015.
Set defined goals for improvement
To give yourself the best chance to improve your finances in 2015, make your future goals as clear and specific as possible. Let’s say you didn’t save enough for retirement. Instead of setting a vague goal like “save more for next year,” break that goal into short, specific goals. Make sure to give each goal a time frame and a set dollar amount so you know exactly what you need to be doing for your plan.
For example, you could aim to put aside an extra $25 every week that will go towards your retirement savings. This way you’ll be taking action right away to improve your situation and can see quickly whether you’re falling short because you’ll know when you miss a weekly payment.
Account for life changes in 2015
As you’re figuring out your goals for 2015, be sure to account for any major life changes that are coming up. Maybe you’re starting a new job, getting married, having a child, or moving. Any one of these changes will have a big impact on your overall budget and you need to figure out how your spending will change to make up for any potential new expenses. For example, having a baby is going to take up a large part of your budget so you’ll definitely need to find more ways to save so you can keep up with these new expenses while also managing your long-term goals.
Changes can also help you reach your financial goals as well. If you think you’ll get promoted or receive a raise next year, start anticipating how you’ll use this extra money productively. Without a plan, it’s easy for this extra income to slip through your fingers. You might even be able to make this positive change happen yourself. If you’ve been doing a great job at work and everything’s going well, try asking for a raise at the end of the year.
Consider using online budgeting software
Going through a budget review without good records can be a frustrating experience. Fortunately, technology is making it easier than ever to track your budget and your financial goals. There are a few online programs where you can update your budget information each month and the program will help you plan for the future. Mint is one that you can use, and it’s completely free. YouNeedaBudget.com is another option. You can demo the program for a month for free, but after it costs $60 to set up.
Both programs let you update info like your monthly bills, your salary, and your expenses. You can analyze your spending and see how much money you have left over. Mint and YNAB also give you suggestions for how you can better achieve your financial goals. If 2014 was a struggle, budget-wise, using an online tool might be your solution for keeping better track of your money.
A solid budget is the foundation of any financial plan. By using these year-end budget planning strategies, you’ll put yourself in a great position to improve your finances and have a successful 2015.