Annual Budget Recap and Financial Goal Setting

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Most people start their New Year’s resolutions on January 1.

I would argue there is some fault in this logic. Yes, it’s a brand new year, but it also seems to be the busiest time of the year.

Personally, I’d like more time to reflect on the past year before I make plans for the new year. That cannot possibly happen in any meaningful way in the month of December.

Plus, when it comes to financial goals the final numbers aren’t in until the clock strikes midnight on December 31.  Then if you’re (crazy) detailed like I am you want some time to review those numbers before you make goals and decisions for the year ahead.

In the Midwest, where I live, it tends to be cold and dreary in January. With no big plans on the calendar it’s the perfect time to grab a cup of tea, a warm blanket and reflect and plan for the year ahead. If you have been budgeting for any amount of time, then you owe it to yourself to do a budget recap once a year.  This budget recap allows you to review where you were spending your money, how much and make informed decisions and realistic goals for the year ahead.

If you haven’t started budgeting, maybe that can be your goal for this year. Be sure to check out my post about Every Dollar, a FREE, web-based budgeting program.

Why do a budget recap?

  • You can calculate your average spending in any or all budget categories per month
  • You can find areas to try and reduce your spending
  • You have a better overall picture of your true expenses
  • You can better calculate how much needs to be in every budget category (for instance, maybe you only allocate $25/month towards car repairs and twice the previous year you were blindsided with hefty car repair bills. You may increase your monthly allocation towards repairs)
  • You are able to see how much progress you have made on your financial goals, especially if you are working to pay off debt.

How do you do a budget recap?

  • Calculate how much you spent each month in each category you are reviewing. For instance, I went month by month and jotted down our grocery and eating out spending. Then I totaled all those amounts together to figure out what the average we were spending each month was.
  • I didn’t calculate the spending for categories that are static, such as mortgage payment, car insurance, etc.
  • I created an excel document with each budget category listed. There is a column for total spending for the year and average per month.

For those of you interested in completing your own budget recap, I’ve tried to make it simple. You need to change the categories to your titles and plug in the numbers. The formulas are already set up. , Annual budget recap sample It is not fancy, but it is effective.

How do you set goals with this information?

Each person/family will have different goals they want to work on. Our overarching financial goal is to eliminate our student loan debt. It still seems like it is going to take forever, but being able to look back and see that we paid over $16,000 towards those loans in 2016 reaffirmed that we can do this.

Maybe your goal is saving for a vacation or putting money aside for Christmas each month so you don’t break your budget in December. Maybe there is a home improvement project you really want to accomplish this year. Or maybe it’s something as simple as you want to reduce your spending in the food category.

It is important that you and your partner agree on the goal(s) and how to best work towards them.  I can tell you from experience that while we both have the goal of paying off the student loans we may not always agree on how to best accomplish that. I am willing to forgo most luxuries until it’s paid off, and Brian is not quite as “gazelle intense.” (If you follow Dave Ramsey, you understand the gazelle reference.)

If you have not yet set any goals for the 2017 year, I challenge you to consider doing so. Then share them with someone. You are far more likely to find success with your goals if you state them out loud.

Feel free to share your goal in the comments section.

I'd love to hear from you.

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