This is the time of year to start the planning process for next year. I'm not talking about the New Years resolution process, which is 50% dream and 50% wishes.

I'm talking about the substantive steps that we can take to give the year form, function and direction. And, yes, that will lead to better outcomes.

There are three distinct steps to take. It doesn't have to be complex, but yet thorough.   Since this may be your first time through such a process, it might require time to put together. The good news is that from this point on, you will need to fine-tune it only, adapting it to the changes that the next new year will bring.

So what are these steps?

STEP ONE

Ask yourself, your partner, and your family about what will be different about the coming year. What trips are planned (or how big should the vacation/travel "pot" be)? What special events may be happening (graduations, big birthdays, summer camps, weddings, etc.)? Make a list of them and give each a maximum amount that you're willing to spend. If you've never done this, you start by pricing out the components of the event and then adding them up. Many of my clients are surprised by the results when they do component-planning and then add them up. This list is a valuable element of your irregular expenses chart for the new year.

You would also want to include any monthly expenses that may be changing (insurance costs, tuition, lessons, etc.).

STEP TWO

Using the numbers from the current year, and the numbers you arrived at in Step One, build a chart of your irregular expenses (the link to a form you can use is here). To use the chart, enter the annual amount and then each month as you spend, enter the amount spent.The chart will automatically make the calculations.  If you have any questions, please email me and I can help you better understand how the chart works. 

Your irregular expense amount is all of the expenses that are not monthly occurrences but rather those irregular amounts that cause you cash flow blips during the year. Smoothing out these cash flow road-bumps is a major part of making the new year better than the last.

STEP THREE

Develop a spread sheet with three columns:  

1.  Monthly Flexible Spending,  

2.  Monthly Bills/Fixed Expenses, and  

3.  Irregular Expenses.  

Everyone seems to be able to rattle off their fixed expenses: rent or mortgage, utilities, insurance, car payments, regular expenses such as gardening, housecleaning, lessons, childcare, etc. Whatever you'll pay every month no matter what.

The irregular expenses you have already calculated on the chart, so those go in that appropriate column.

The Monthly Flexible Spending column includes things like: food (groceries & eating out), gas, errands, entertainment, personal care, clothing, and such.

Add up the column for Monthly Bills/Fixed expenses, and add the result to the total of the Irregular expenses column.   This combined amount, subtracted from your take-home income, reveals what you really have to spend in your monthly flexible spending account.

Getting the Plan to Work

If this isn't enough to cover all the things you have in the Monthly Flexible spending account column, then you get to work. You look at each item in each column with an eye to reduce, eliminate or postpone the costs.

REDUCE: this could be in the amount spent or in the frequency of the spending. The "game" is to find virtually the same lifestyle choice for less or no money.

ELIMINATE: this would be items that are habit rather than required. For instance, you may have started getting massages weekly when you had a back injury that was eased by massage during your healing. You want to revisit that decision and see if it is still required. We get used to things and then consider them needs. This gives you the opportunity to make new choices.

POSTPONE: this would apply to those items that have choice as a characteristic. Perhaps the trip to Paris happens next year (saving some this year and next). Perhaps the remodel project commences next year. Perhaps you delay your newer car purchase another year until you have more down payment saved.

Taking these steps lets you see if the year will "fit" before any dollars are spent. You will reach your goals because you've taken the time to plan how it will work. You've aligned your expectations with what is possible and will feel the positive sense of accomplishment that meeting your objectives brings.

Will this bring you a better year? Yes. Dreams and goals that are linked to planned funding will come true. It's the magic of planning. Here's to a great 2014.

If putting this plan together sounds like climbing Mt. Everest to you, then give me a call or email me. I love helping my clients change their lives for this year, and for every year following.