Douglas Sedam
Creating a budget that works for you is the first step in your financial journey moving forward. It is now time, as we end this, to say the least, tumultuous year called 2022, that we determine where all our money went and then create our own spending plan/budget going forward and carrying you through 2023. It is the key to finding money to put toward your financial goals, from getting out of debt, taking those vacations you so deserve, financially assisting family members, or any other goals you may have moving forward. Here are some tips.
1. Trace your income and expenses for this past year. The first step is knowing where your money is going/went and how much money is coming in each month. This is the critical first step to establishing a new budget for 2023.
2. Decide if your savings, retirement, and/or investment income from this past year will mirror your cash flow for 2023. When it comes to investment income you may want to consider the possibility that this recession, which I believe we are already in, may cause increased investment losses and therefore lower income to draw on. This might mean that you may have to start drawing from your savings to supplement your income and pay your bills.
3. Know all your bills. Sourcing your income is the easy part in preparing a budget for the next year. It is finding out what you spent that takes some work on your part. Start by making a list of all the monthly recurring bills you have like TRICO, Mountain Pass Utility, Waste Management, Southwest Gas, Arizona Water, Century Link, Netflix, etc. You would be amazed how many monthly/recurring bills you have. My wife, Melanie, is going through our monthly statements and producing an average monthly expense for recurring bills and then we are adding 10% to that monthly average as these bills are indeed going up! Then take in account what you spent on vacations, financially assisting family members, birthdays, Christmas, automobile expenses, Medicare and supplemental insurance, life insurance, food (this has gone up over 20% this year!), and all the other expenses you had and then simply do the math.
The Big Question: Do you have the income and/or savings to maintain that lifestyle you had in 2022 in 2023? Can you maintain that lifestyle or do you need to make adjustments in your 2023 budget?
There are a multitude of budget templates in an Excel format/template you can customize to your own needs. We purchased one many years ago that Melanie has customized to the point where now we only have to fill in the numbers. I suggest you find one and start this eye-opening and sometimes, frustrating, experience, but it will help you plan your financial future and still be able to enjoy some of the fruits of your arduous work over your lifetime.
Douglas Sedam was a financial advisor for over 30 years in California. Doug can be reached at 520-829-5219 #1 should you wish to call him. Enjoy your holidays!