January’s Financial Challenge

It’s January!  Yep, Christmas is over and all those bills are arriving in the mail or in your inbox. That means that it’s time to figure out how you are going to pay all those monthly payments!  Don’t worry, you’re not alone.  Most of us spend way more than we plan to every December, and as a result, most of us are trying to figure out exactly how to pay them all off sooner rather than later.  Let’s start by taking a long hard look at your finances.

Personally, I have a worksheet that I use every month to track both my overall monthly income and my non-discretionary expenses.   The income section lists regular (normal) monthly income as well as any additional income that I earn from any outside sources.  For example, if I get a bonus at work, or if I earn a few extra dollars for selling something, or even if I just get an unexpected refund on a bill that I may have overpaid, it goes into the additional income line.  Then, I total all my income.

Dropping down a couple of lines, I have a section for my bills.  Not only do I list the payee, but I also list the starting balance for the year, then the monthly payment amount, along with the amount paid each month (in a separate monthly column).  Finally, I add a column to update the monthly balance and a column to show me the year to date change in the total amount owed.  And, here’s the hard part… I total up ALL of my indebtedness (including the house and the car) to get a true picture of everything that I owe.  Yes, when you add in both the house and the car, well, it seems insurmountable.  But it’s my financial truth.  And I am focusing on all of it.  (You may find it easier to just list your credit cards.  It depends on what you’re working toward.)

Then, at the bottom of each column, take your total income and subtract your total expenses.  This should give you an amount that will be your discretionary spending each month. (For me, discretionary spending includes my grocery bill because that’s something that I can change by shopping smart, but it doesn’t include utilities because that’s pretty much set in stone – I just use an average amount and put it in the non-discretionary column.)   The higher the amount of discretionary spending money that you have, the better your bottom line.  Pretty simple, isn’t it?

Now that you have an overall financial picture, you can look at ways that you might be able to reduce these costs.  For example, is there a better cell phone plan for you?  Perhaps you may decide to change your cable subscription?  (I dropped my cable company, then signed up for a couple of streaming services, and saved over $70.00 per month.)  And most importantly, you can look at how quickly you can pay off some of those interest bearing accounts!   For me, seeing the balances of credit card bills decreasing on a regular basis is the best motivation there is for sticking to my financial plan.  But, this is also about you…

What’s your motivation?  Find it.  And then, start saving money!