News you can use:  It’s not too late to contribute to a Roth or Traditional IRA for 2010. One thing you don’t want to overlook, is that earned income workers can make the maximum contribution on behalf of a non-working spouse as well.   Note the year on the check and get it postmarked before April 18th (Yes, thanks to a holiday unknown to many outside Washington DC, we get a few extra days this year.)

I hope you don’t mind that I have taken the liberty to reprint an article from our February 2007 newsletter.  I have gotten a number of inquiries recently about budgeting.  Thankfully many of these are not from the cash strapped, but from those wanting to save more for a family vacation or contribute more towards retirement.  Learn more here, but always remember we are only a call away for further assistance, and our job is to empower confident action for you and your family. 

Even though the days are getting longer, there is no escaping the fact that we are in the depths of winter.  Although it may seem easier to curl up with a cup of tea near the fire, winter is a prime opportunity to consider our future goals while simplifying our lives.

One of the best ways to accomplish this is to create a budget.  This will require an initial commitment of time, but the dividends are high and it’s cold outside anyways!  What better way could you imagine spending a frigid day than planning for your future (perhaps a warm vacation next winter) and learning about your spending habits? 

It’s easy to get off track without a budget.  For example, when I go to the grocery without a list, who knows what I might end up with.  “How exactly did Timballo di Piccioni end up in my cart?”  I can’t even pronounce it let alone spell it!  It sure looks tasty though!  Making a list keeps us on track to do and buy the things that are necessary in life.  Just as having a list will keep you out of the exotic food aisle at the grocery store, a budget can help you avoid missing a vacation or getting into credit card debt.

Start your budget by making a list of your expenses.  Some things like the gas bill or the cable bill are easy to find in your checkbook registry or online bank statement each month.  The expenses from the local grocery could potentially be broken down in a dozen different ways, but for most of us a trip to the grocery isn’t “Entertainment.”  Simply label the category “Essentials” and be done with it.

When you find yourself at the end of the list after Essentials, Mortgage, Vacations, and the doggie day-spa you might realize that something is glaring.  It’s that gap between your income and your expenses!  Recognize that gap as an opportunity.  Carefully determining where your money went will help you see where it could have taken you!

Here’s an example of how it all works.  A client came to see us a few months back for our Prosperity Planning™ services.  We will call her Mary.  Mary needed to save more money today in order to successfully have the retirement lifestyle she desired.  The dilemma Mary faced was that when things were said and done at the end of the year, everything that went into her wallet had gone back out.  Unfortunately Mary could only account for about three-quarters of the dollars she had spent.  By creating a budget she found the money she needed to prosper during her retirement years.  Now Mary is on track and looking forward to some amazing years ahead of her.

Another way to simplify is to take an inventory of what you have but don’t really need.  Let’s see, the new suit that was only worn once, an electric countertop nonstick quesadilla cooker (still in the box of course) and probably quite a few other items that were “great finds.”  In the end, the lack of budgeting often leaves us a few pounds heavy and a few dollars short.

A budget creates a better understanding of your personal finances, and thus greater personal power to make the best choices for your desired lifestyle, both present and future.  It is okay if you occasionally stray from your budget.  Think of it as a guide rather than a law so that you can appreciate rather than resent your new responsibility.

Finally, remember that you are not alone.  Budgeting can be a challenge, but it is well worth the investment of your time.  All of the dollars spent due to lack of budgeting could have been put to better use.  A 10%, 8%, or even only 5% return can add up to quite a healthy sum.  It might mean a beach cottage or a substantial travel budget when you retire.  It might even mean your child’s college tuition.

So, take some time this winter before the flowers bloom to put together a budget that will help you keep score.  Weigh your options (electric countertop nonstick quesadilla cooker vs. beach house.)  Understanding your personal financial health can bring you greater joy today and tomorrow.  I think I’ll join you in reviewing my own budget this evening, just after I figure out how to cook my Timballo di Piccioni!

FIVE SIMPLE STEPS FOR A SUCCESSFUL BUDGET

1) Gather together your checkbook register and credit card statements from last year.  Both of these are usually easily available online.

2) Evaluate your budget’s complexity.  Do you need a software program like Quicken or will a simple spreadsheet or pencil and paper do the trick?

3) Create pertinent yet simple categories for your expenses.  Make enough categories to monitor your spending with conscious choices, but not so many that recordkeeping gets complicated.

4) Monitor your budget no more than once a week.  Over-monitoring may lead to boredom, confusion, and ultimately the demise of your budgeting system.

5) Challenge yourself to meet those budget goals you know may be tough.  Consider building rewards into your process to congratulate yourself for staying on track!