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  • Your 2012 Spending Plan

    This new year you may find yourself in a new financial situation. Whether for better or worse, it is important to take the time to assess where you stand and make a spending budget for 2012.

    Remember, everyone’s financial situation fluctuates. Some years you will have more disposable income than others. Adjusting your spending to match your current financial situation is important. How you lived last year may be beyond your means this year. Don’t live your life in your financial past, live appropriately for your financial present and prepare for your financial future. There is nothing embarrassing about a little belt tightening now, especially when it will provide you with a more comfortable future, one without debt and with a safe and secure retirement.

    The first thing to understand is that a spending plan is not a form of punishment; all it means is that you are setting some financial goals for yourself. Those goals might be to simply cover your basic expenses, to put more money in your retirement fund, pay down your credit card or student loan debt, save more money for your kid’s college fund or save up for a fabulous summer vacation. Whatever your financial situation is, it is always good to know where your money is going and to set some goals for where you want it to go based on your current situation.

    The first thing you should do is come up with a realistic financial goal, or maybe a couple of realistic goals.

    Don’t try to achieve the impossible because if you can’t reach your goals it will deter you from setting goals in the future.

    Once you have your goals, write them down. You will be more likely to accomplish them if you have a hard copy. Be creative! Incorporate them into a short story, or write them with lipstick on the mirror. A simple list taped to the fridge will work too.

    Next, build a quick and easy budget. List your sources of income and all your expenses. Don’t leave out the little ones. Like the morning coffee or the $3 ATM fees. Try to jot down everything. You can look at your last few months’ bank statements to get a feel for your income and outgoing expenses and to identify expenses that you may be able to cut back on.

    Don’t forget that little things add up. There are lots of little expenses that you may pay for with cash, so it is a good idea to keep a money journal for a few weeks, see what small cash items you purchase repeatedly, such as food and beverage items. If you need to reduce your expenses, this is a good place to start.

    After figuring out your incoming and outgoing monies, you will know about how much disposable income you have to work with every month.  If you’re in the negative and don’t have any disposable income, then your realistic goals should be to cover all your necessary expenses and try to cut out anything unnecessary so that you can start saving some money. Don’t panic or feel distraught Remember, just because this may be your financial situation this year, doesn’t make it so next year, especially if you follow your spending plan.

    What should your financial goals be?

    When figuring out your financial goals, it is important to priorize.

    First, you need to make sure that your basics are covered: food, shelter, warmth, light, health care and transportation. If those are covered you can plan ahead. If not, focus on those for now.

    After your basics are covered, start looking forward.

    Start your rainy day fund. A good goal is to have at least $1,000 saved for emergencies.

    Next you can tackle your smaller, high interest and/or non-tax deductible debt, such as credit card debt and car loans.

    When your smaller debt is paid off, add to your rainy day fund and start planning for retirement. The rule of thumb is to have at least 3-6 months worth of expenses saved up in your rainy day fund and at least 10% of your income going in to your retirement fund. If this is amount sounds impossible to achieve, just remember you can start small—every little bit counts!

    If your company offers a matching 401(k) option, take it! It’s a great way to save and accumulate some free cash for retirement. Also, open an IRA or Roth IRA and put as much money in every month as you can. Don’t forget that delayed gratification will be your best friend in retirement.

    When you have your retirement plan up and running then you can start paying off more of your bigger, low interest, and/or tax-deductible debt, like home mortgages and student loans.

    Now, don’t forget to throw in an occasional activity, such as a movie, a manicure or a delicious dinner at a nice restaurant. These are great ways to reward yourself for reaching a financial goal. (Just don’t overdo it or you might end up back where you started!)

    If you have all of the above checked off, congratulations! Now you can focus on building your wealth and giving back.

    And Check out WISER’s Checklist for the Decades to see what financial goals you should focus on at the different stages of your life.

    Don’t forget, with every year comes new excitement and new challenges. Periodically reassess your financial situation and adjust your expenses accordingly. Your future self will thank you. Happy 2012!

    2 Responses to “Your 2012 Spending Plan”

    1. Tatiana says:

      Most of your links do not work. Either pdf files do not display pages showing error on pages (other websites work fine and it is not my adobe) or the above link “checklist for the decades” leads me to an outlook email account to sign in (?). I hope you can fix this so I can access the valuable information you have to offer.

    2. admin says:

      Hi Tatiana, I really appreciate you bringing the broken link to my attention. I have fixed the Checklist for the Decades link. We had a problem when transerfing our website from one host to another, and in the process a lot of our links became broken. We are constantly working to fix them, but defitley need the help of people like you to bring broken links to our attention. Please let me know about additional broken links that you find. Thank you!

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    About Us

    WISER is a nonprofit organization that works to help women, educators and policymakers understand the important issues surrounding women's retirement income. WISER creates a variety of consumer publications including fact sheets, booklets and a quarterly newsletter that explain in easy-to-understand language the complex issues surrounding Social Security, divorce, pay equity, pensions, savings and investments, banking, home-ownership, long-term care and disability insurance.

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