Looking for more control of your finances in 2019? Read on….
Controlling your finances means building a foundation for a secure financial future. Developing a financial plan for the year is similar to building something. “Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion?” (Luke 14:28). Having a plan and managing your money and possessions is all about being good a good steward of the blessings God has given you.
Start your 2019 financial plan with a review of your 2018 finances. How did your actual spending compare to your budget? If you’re using a budgeting app, budgeting software or a spreadsheet, it should be easy. Just run a report for the full year, January through December, by category. Review each category to see if you over or under spent in any category. If you’ve been using a budget (aka spending plan) every month, nothing on your year-end report should be a surprise to you.
Looking at each category from an annual perspective will give you insight into your yearly spending. While you are looking at the year in total, it is time to contemplate changes that will occur in 2019 which may have an impact on your budget. Has your income increased? Have any of your expenses increased or decreased? Are there any large expenses on the horizon for 2019? Are you preparing for a life change such as marriage, retirement, buying a house, or a new baby, which will all impact your budget?
Once you have thoroughly reviewed last year’s budget and changes that will occur in the new year, you have a good basis for creating your 2019 budget.
If you do not have a budget from last year to use as your starting point, now is the time to create one. Set up categories to track your spending and estimate how much you spend in each category. For the first three months of 2019, track what you actually spend against your estimates in each category. This will be the beginning of a budget. At the end of March, average the first three months of spending in each category to come up with a preliminary monthly budget by category. Be sure to include those expenses which only come due quarterly or yearly. Refine your budget each month as you have more and more data. Do this for about 6 months, then reevaluate your monthly averages to define a solid budget to use as a tool for managing your income and outgo.
Another way to check on your financial progress each year is to use the Money Map, which is available on the Compass Catholic website. This map takes you through the steps to reach True Financial Freedom, which means you have no debt and you have saved enough money to fund your retirement. It provides you with a step-by-step plan to accomplish short term, mid-term and long-term goals to reach financial freedom.
There are seven destinations on the Map and each destination has several steps. Look at each destination in order and check off the steps you have completed in each destination. Once you’ve done that, go to the earliest destination that is incomplete and complete the open steps in order. As you complete once destination, move to the next.
Our third suggestion for a yearly checkup is to calculate your net worth by listing your assets, and subtracting your debts.
Your assets are the value of everything that you possess (house, cars, electronics, furniture, jewelry, boat, and tools, along with the value of checking, savings and retirement accounts, etc.)
Debts are everything you owe (credit card balances, bank loans, mortgage loans, lines of credit, car loans, student loans, even loans from Uncle Fred.
Your goal is to have a positive net worth—the value of your assets is more than what you owe, not a negative net worth—you owe more than your assets are worth.
Hopefully, from year to year, you will see your assets grow and your debts decrease, which means your net worth will be increasing and you are making progress to true financial freedom!
This is a long term journey. We still are using the basics from the plan we developed around 2003. The plan has been reviewed, updated and adjusted each year as our life changed. Over that period of time, we became empty nesters. We both changed jobs several times. We bought and sold houses in different states, had salary increases and decreases, retired, and qualified for Social Security.
Every year as life changed, we tweaked the plan based on the changes in the previous year, or the changes we anticipated in the new year. We also reviewed and updated the plan when those life changes occurred. The plan always provided a sanity check at each step along the way
The Lord tells us in Psalm 32:8, “I will teach you the way you should go; I will instruct you and advise you.” Developing a plan and wrapping that plan in prayer will help you become a good steward of all the blessings God has showered upon you.
We encourage you to become financially free so you are liberated from the bondage of debt and can serve God in the unique way he has called you.