Learning from 2018 and Looking Forward to 2019

Quinton Cannon | Financial Coach | The Financial Clinic

As 2018 comes to an end, we all have an opportunity to look back and reflect on the year gone by and use insights we gain from that process to inform our decision making in the year to come. This process is especially important when it comes to your finances. The end of the year provides a great opportunity to plan out the coming year and make sure our spending behavior aligns with our financial aspirations.

Goal Setting

As a financial coach, I often talk with people about making and tracking financial goals, such as paying for education, saving for retirement, or building an emergency fund. As I have accompanied people on their journey toward achieving their financial dreams, I have become convinced that the best goals are those that are specific and quantifiable. People are just generally more motivated when they are working toward a specific target and can measure their progress toward it.

Budgeting to Achieve Goals

Setting a specific goal is a critical first step, but what follows is equally important. Once you know what you are working toward, you should budget and make a plan as to how you are going to achieve it. With a realistic budget in place, you can plan out how much you will be able to set aside each month and thus project how long it will take you to reach her goal.

Unfortunately, it is easy to get trapped in thinking about budgeting on a month to month basis and allowing long term financial goals to get lost in the mix while trying to meet your current obligations (particularly during expensive times like the holiday season). When money gets tight, savings and longer term goals are often the first things that falls to the wayside.

So, as you’re reflecting on the financial goals you made in 2018, you might find that you haven’t made the progress you thought you had toward building up that emergency fund or college savings, even though you were doing our best to follow a monthly budget.

The Importance of a Yearly Budget

If you haven’t made progress towards your long-term goals you may be asking, what happened and what can you do to get back on track? The answer lies in reviewing the past year, and creating a realistic yearly budget for the new year.

This isn’t always a quick process. While it might be relatively easy to figure out what you spent on fixed expenses (e.g. rent), it is considerably more challenging to estimate your variable expenses for the year (e.g. clothes shopping). So, in order to get a good sense of what your spending truly looked like for the year, you’ll likely have to do some digging.

If you’ve kept good records of your monthly spending throughout the year, you can simply add up the spending data you have compiled to see how much you spent overall and in a number of categories (e.g. restaurants). If you got busy with other things during the year and haven’t been able to keep consistent records, you’ll have to put in a little more effort. There are several ways you can go about getting your hands on your spending data; bank statements and/or automated budgeting apps (like Clarity Money, NerdWallet, or Empower) are probably the two most readily accessible options.

How you compile and break down your yearly expenditures is, of course, totally up to you. As a general rule of thumb, I would say that the more detailed and precise, the better. Good financial decision making and goal setting is greatly facilitated by having solid information to draw on. Having said that, you certainly don’t need to be a spreadsheet master or have everything perfectly accounted for. Having even a general sense of your fixed and variable expenses for 2018 can go a long way toward helping you in 2019.

This is because seeing aggregate data can really put things into perspective by helping you understand the effect of seemingly mundane decisions. For example, $6 for a quick meal on your lunch break might not seem like too big of a deal. But if you were to spend that much on lunch consistently, it could add up to be around $1,680 over the course of a year (assuming you took a few weeks off either from work or eating out). Small amounts can add up; thankfully, this is just as true for savings as it is for expenses. If you were to shave off $2 from your daily lunch bill in the above example, you could save $700 throughout the course of the year and be well on your way to building up a good chunk of savings.

Yearly spending data can also help you identify trends that might not be immediately apparent if you are just budgeting month to month. Perhaps you have a time of the year that is particularly expensive for you while another tends to be relatively cheap. Budgeting isn’t just about identifying things to cut back on; it’s also about understanding these trends so you can save extra money during low cost times and have a cushion to get through pricey months. The more accurately you can track and predict such times, the less fluctuations will affect your planned progress toward your goals.

Looking to the Future

Be sure to set aside some time in coming weeks to review your spending for the year and draft a budget for the coming year. If you are feeling like you could use a little extra help with this process, try meeting with a free financial coach. They can help you get organized and ready to take on the new year. You can make an appointment here. As you take stock of your year, you will gain several important insights into your spending that you can use to improve your financial decision making during the coming year and, as a result, come closer to achieving your financial aspirations.


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Avoiding the Holiday Hangover: End of Year Financial Planning

By Andy Collado | Financial Coach | The Financial Clinic


For many people, the new year means a fresh start, resolution setting, and getting ready for the fresh start that lies ahead. However, for many of these same people, it also brings a hangover. This hangover, however, has nothing to do with the number of champagne bottles popped at the stroke of midnight, but the feeling of the void left in your bank accounts after a season of spending. The holidays are a joyous occasion where love, cheer, and material goods are spread freely amongst your closest friends and family. But the good times can, unfortunately, lead to depression when bank statements start arriving in your mailbox.  Luckily, a little planning can go a long way toward making sure a season of giving does not lead to a season of regretting. Planning for the holidays can start at any time. It incorporates both clever savings and spending strategies.

If you feel that you run out of money or get sideswiped by the costs every holiday season, you may have an issue with planning out your expenditures. Every year try to think about all the costs you will incur, from the ingredients for the dinner you want to cook your family, to a list of the individuals you would love to give to this season. Sit down with a piece of paper and ask yourself how much would I like to spend on each item/person. Do a bit of research to confirm that you were in the ballpark for the items and pledge to stick within the budget you set per person or event. You will have a solid estimate of total costs after adding up the individual items. This amount is your starting point. Divide the amount by the time you have left. Although this blog post is being released in November, which doesn’t leave you much time, you can still review the money you have saved throughout the year or simply view this as a jump-off point for next year.

Let’s assume you have $1,000 as your costs, and 2 months left. That means that you need to find $500 a month. If you started in January, that amount would only be $84. Starting early can significantly ease stress. Savings can be found throughout the year by actively plugging spending leaks (fees and charges that can be avoided), reviewing all the products and services you use to see if you can get them at a lower cost (car insurance, cable packages, etc.), and employing consistent savings strategies. A financial coach can help you find these savings.

If the money is not there, many people choose to cover their expenses with a credit card. With the many reward programs available, it can be a great way to lower future costs. You can build enough points to purchase wanted items for free, including vacations. This is only a benefit if you pay off your credit card balance quickly. Otherwise, you can quickly erode the potential savings. This goes twice for those tempting sales during the holidays.

When you are planning your credit card purchase take into account how much it costs (purchase price plus monthly interest) and how quickly can you pay it off in full. You are being charged interest for any balance you do not pay off. Calculating this interest into your total costs will help you make more positive spending decisions. A new TV is only 20% off if you pay the card before they charge you interest. If your interest rate was 24% and all you did was pay the minimum you wouldn’t benefit from the sale at all. In that case, you would actually be paying 4 % more. The minimum would only cover the interest rate. This holds true for any sale but is more important during this season. Use a spending plan so you will know how much you can afford and adjust your expenses accordingly.

Up until now, we have spoken only about those things that cost money and how to plan for them, but let us not forget what the holidays are about: family, friends, and camaraderie. Some of those goals you want to accomplish aren’t tied to your bank balance. You may want to spend more time with family or friends, or get in better shape, or be more grateful, and this is the perfect time of year to work on those resolutions.

Planning out your holiday spending will give you the freedom to enjoy what really matters. Being able to give presents or cook a great meal is a blessing but, in the end, it is rarely what’s remembered. The most memorable and important thing will be the time spent together with loved ones. Don’t lose sight of that. As financial coaches, we work with our customers to focus on those passionately held goals ahead of us, goals that fall in line with those values you hold deeply. This is the time of year to remember and celebrate those values. Happy Holidays!