Cash flow planning month is fast over. And Wow my calendar get full fast! If you did get a spot I was happy to meet you! If not, inform me. I’ll give you the hyperlink to my “secret” calendar — one that’s not on fpfo.co/meet — which will allow you to reserve an hour-long slot for us to go deep into your cash-flow strategies.
If we had a meeting you, we probably reviewed your budget for 2022 and established objectives for your 2023. If not, perhaps meetings aren’t your thing, or you’re not available for the same times like I am, this is fine. This time, I’ll explore the basics of budgeting by providing three easy steps you can follow to prepare yourself for a successful budget and save by 2023.
1. REVIEW 2022.
It is possible to bypass this step if we had a meeting during the month of February cash flow. But, I’d like to recommend taking an examination of the following couple to refresh your memory.
If we didn’t have a meeting this month, you may begin your planning for cash flow with the retrospective. Take a look at all your spending for the entirety of 2022. If taking the bank statement, your receipts and credit card statements and then categorizing your spending isn’t enough it is possible to do this without a second thought! However, you need pay particular focus on the following two steps.
Do you have those 2022 results in your notebook? Connect them to Your copy of Cash-Flow Planning Worksheet of FPFoCo and create your own. You can alter everything you’d like to, from how things are referred to, the manner in which they’re categorize and much more. The entire system is editable and you’re able to play around with it even if not a regular RightCapital user.
After you’ve completed the Worksheet completed now, take a take a step back and review your financials. Which areas did your spending surprise you both in positive as well as negative ways? What would you like to spend moreor lesser? What’s your bottom line? Do you have an unrealized surplus, but not enough to go into savings? Are you showing an unsustainable deficit, which means you needed to tap into savings to fund your life?
Bring your ideas and answers to these questions to the next step.
2. SET GOALS FOR 2023.
No matter if you have a complete calendar year to analyze or not, you should set some achievable targets for 2023. Let me repeat this again and say: Make some realgoals to achieve in the year 2023. The sheet is designed to allow you to navigate through the sections from the top to the bottom. You can also move between every step of the process, I recommend to approach it this way beginning with Step 1.
Why? The costs you are more in control of altering are the ones that are most likely to be in the middle and you should plan to concentrate your time setting goals there.
How did the events unfold? Are you left with a surplus that you could utilize to boost your savings? Could that surplus be your “slush” money for the things you’ll forget? Do you have to make another look at Step 5 to free up certain expenses, and transform your anticipated spending spree into a surplus or breakeven?
Go through it the process again to discover ways to match your spending habits to your beliefs. Do you prefer to spend less on Amazon, Target, or Costco to increase the amount you spend on vacation? Make a plan to cut back on household items so that you can eat out with your loved ones this year?
Once you’ve set your goals now is the time to begin working towards them.
3. TRACK YOUR SPENDING.
This is, by far, the most important thing to do. It’s not just because it will provide you with the information that you’ll need to begin fresh with the first step next year. (Before you say yes I recommend doing this each every year!) It’s the most critical action because it’s how you convert your cash-flow strategy into cash flow actions.
How? Okay, while I enjoy spreadsheets but I’m not a “monitor all of my spending in a spreadsheet” kind of person. (If that’s you, congrats!) That’s why I’ve allowed technology to take care of it for me, in the form of a budget tracking application. While I’m not in favor of making use of any app specifically I do personally use Mint’s free version. Mint. Other options I’ve come across comprise the YNAB, Rocket Money (formerly Truebill), Copilot Money as well as Tiller.
(Send me your favorite ones to me so that I can look them up!)
After you’ve picked the option you’ll test (or attempt first) join your accounts. Then, you can plug in the goals you’ve established in the cash-flow planning worksheet. They will be used for the weekly check-ins that will show the progress of your spending. You definitely didn’t put in the time setting goals just to get them done! When you look at your weekly reports you’ll find out how much of each category’s spending you’ve spent — and what remains for the remainder for the remainder of your month.
I suggest weekly check-ins since I’m aware of the frequency with which most of us (and myself) purchase items. If we don’t check in every week (myself as well) it’s difficult to control spending and keep track of it. (Mint sends me weekly reminders to keep track of my spending, which serve as a helpful reminder.)
Therefore, spend 15 minutes every week looking over your spending categories and then reclassifying whenever needed. The app will probably learn from your experiences and improve the way you identify your purchases as time passes. Then, you should check your spending levels to know where you are. I like to keep it simple by having just eight categories, and everything else goes in the “Everything Else” bucket. There’s plenty of “other” sometimes, and it’s fine. It gives me an idea of where I’ll have to change my priorities!
Here’s a quick overview of the categories I use in my Mint app, so that you can be aware of how easy it is
Auto & Transport includes gasoline as well as insurance registration, maintenance, and.
Mobile phoneis my bill for my cell phone, along with accessories (like replacing my glass screen protector that’s constantly breaking).
Televisionis intended for the reason I have a Hulu account.
Financialholds my personal Disability insurance cost.
Groceries keeps track of my legitimate grocery purchases at the supermarket.
Restaurantsgets all food and drinks related, such as eating out, take-out coffee shops, bars, liquor stores and many more.
Sportsis for my hockey and running gear races, race registrations and ballet and ice skating costs disc golf purchases gym memberships, Avalanche tickets — everything that is related to being physically active and participating in the various sports.
Mortgage and rent will be my monthly rent as well as renters insurance.
I have a “bonus” category is Other spending that covers any purchase categories that aren’t a good fit for the above. An example of this would be “Shopping” for clothes and household things, which I usually do to avoid regularly on a monthly basis. “Personal Care” also goes there because I don’t have a schedule in place for self-care items or haircuts. Another category is “Gift.” Since they’re only available during the season, they don’t receive their separate category on an annual basis.
That means that I need to be mindful of these other expenses and ensure that I maintain a surplus in my budget to cover these expenses arise. The ability of my app to track these expenses all through the year vital to the annual Cash-Flow Planning Worksheet refresher. Since I don’t track these, I can go at my apps and determine what my total budget will be for the upcoming year, if I have to make changes or not, and what I should be aware of for these categories to keep track of my goals.
If I tell you that budgeting doesn’t need to be a hassle I’m serious about it. I hope you’ll see it here!
The weekly tracker will help you keep on the right trackas you review the current situation and how far you’ve got to take it. The worksheet breaks down your Cash-Flow Planning Worksheet down into small pieces that will help you move closer to your goal.
Do you find yourself spending less or more on an average weekly basis? This could lead to an over- or under-spending of your monthly budget. If you see an increase or decrease in your account return to the Cash-Flow Planning Worksheet to conduct an update. If you’re looking to increase your spending in a particular area, locate another area where you can reduce the outflows, and then adjust the goals of your app in line with the changes. Are you able to allocate more money in a specific category? Transfer it to savings or increase spending in a different category that is aligned with your ideals.
