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Reorganize Your Finances to Achieve Your
Financial Goals We all know it’s the time of year to
get your taxes together. We see people cheering about their refunds on TV com- mercials and guys in costumes on street corners.
You don’t need to hear any
more about it from me. This month I want to talk about how
you can reorganize your finances so that you know where you stand and where your money is going. You should be do- ing this as a good consumer. You should be doing this to give yourself some direc-
tion in your financial life and drive yourself towards some sort of financial goals. But where do you begin? Whether you have a handle on your monthly budget or not, its good practice to step back and analyze your habits a couple times each year to make sure what you actually do is consistent with where you want to be. You should established financial goals and outline a path to achieve those goals. No goal is too small. It may be that you want to pay off a small high interest credit card. Maybe you want to figure out how to take a vacation towards the end of the year.
It really doesn’t matter what the goal is,
by taking the time to look at your spending habits you can find ways to make adjustments to make your goal a reality. The satisfaction of developing and following through with a financial plan will help you set and achieve future goals.
Maybe the goal is something entirely different. It could be that you have
money and you spend money and sometimes you have some leftover but you really don’t know where or how you spend what you make. In this case you can really learn a lot about yourself if you take the time to figure out where you spend. I help people develop personal budgets all the time and what I have found is that there is almost always money being spent that can be redirected for another purpose. It doesn’t take a rocket scientist to figure this stuff out either. Have you ever taken the time to figure out where it all goes? Today more than ever you NEED to know where it goes. So, to summarize so far, you need to understand your spending hab-
its and figure out what you are doing NOW so you can control how and what you spend LATER. No time better than the present. 1) I would suggest using a spreadsheet but you can list it out on paper
too. I suggest a layout that has specific income and expense item descrip- tions in one column and two other columns to the right that list out the related dollar amounts as they come in or are spent. For example, if you are paid bimonthly then you have a column for transactions that occur between the 1st and the 15th of the month and a separate column that accounts for activity that happens between the 16th and the end of the month. If you are paid dif- ferently then adjust your schedule accordingly. Also, go off your take-home pay in a typical month (I have to assume that your income taxes are being done correctly and your take homepay won’t leave you holding the bag at the end of the year because that’s how we get it done for my clients). 2) Once the layout is set, start populating your monthly fixed expenses in the right column for when they occur during the month. Rent or mortgage,
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car payment, auto insurance, phone, utilities – use a conservative average for items that fluctuate some.
3) Next drop in other semi-fixed costs such as bi-weekly gas, groceries,
pet care, etc. 4) Last, add monthly MINIMUM debt payments Now we’re getting somewhere. You have accounted for all your baseline
monthly obligations and the remainder you can direct and now control. Maybe you add a line in for dining out – figure out how much you need to enjoy your- self and how often you can afford to do so. Maybe there is a line for long-term cash cushion savings – you want to have 6 months living expenses saved in cash. You get the point. By following this practice you can see just how much is leftover for discretionary purposes and you at least can consciously decide where your money will go. If you have a substantial change in income, repeat the process. Either way, repeat the process maybe quarterly or at least twice per year so that you can assess your goals and progress towards them. If you need help developing a budget contact me and we’ll work through it.
Michael E. Greenberg CPA 42072 5th st. Suite 302C Temecula, CA 92590
mike@frenchvalleytax.com www.temeculatax.com www.frenchvalleytax.com
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