Many Americans are in dire financial straights right now, and we’re all looking for ways to feel less stressed about money. I lost my nine year job at Freescale Semiconductor in late 2009, and have only had a “real job” for 6 months since then. Not only am I not bankrupt, but I actually *quit* a very stable job at AT&T with a short commute to pursue my own iPhone gaming business. Sound crazy? You’re not alone in thinking so! I certainly *felt* crazy at various points. But the value of having a solid financial plan is that you can see *rationally* whether or not a certain decision fits your needs *instead* of relying on often unstable emotions that a literal army of marketers, salespeople, politicians and parents are constantly trying to manipulate. The numbers show the real story!
In addition to Looking Forward at the end of a year, it’s also the perfect time to look back. I’ll be filling this space with all sorts of scrumptious details of How Things Went this year, but to start with, let’s see how well I tracked my budget. If reading about this sort of things brings up crazy feelings, that’s great! I’m here to show you how to feel better about money. Seeing the whole thing in action is *very* empowering.
Here’s the sanitized graphic of my Money Story for 2011:
As you can see, I did really well! I only went over in three categories, and the amount I saved in the other categories put me at total of about 14% under budget.
How did I accomplish this?
I tracked my spending
For how long? I did nine months. The longer the better, but really you only need enough to get a good idea of your *average* spending per month. Mint makes this pretty easy if you’re willing to use it. Quicken also makes it easy, and many credit unions allow you to do the same with online tools. You can also do it through your bank, if you insist, for some reason, on having one.
By the way, if you’re pissed about how the banking industry has trashed the economy, ripped off our tax money through the bailout, all while making record profits, the single most proactive step you can take both to get revenge and restrict their power in the future is to move your money to a credit union. Credit unions exist only to help their members, not to make a profit, and are the Right Answer to much of what’s wrong with our economy.
This takes away the excuse that “It’s too hard to keep track of every little thing!” This way you don’t have to, it’s done automatically. All I had to do was double check my transactions at the end of the week to make sure they were in the right category, which generally takes less than 15 minutes. Once you have this data, you have a reasonable guess as to how much the future will cost.
I anticipated anything that would be different this year than last year
I went on several trips in 2011, rented out rooms in my house to reduce my expenses, and sold one of my vehicles. I did some guestimating at how much all this would cost, and figured that in to my original numbers.
Once I had these two things, I simply added them together, figured in a conservative guestimate for taxes, and pretty much knew how much 2011 would cost.
Now that I have *this* data, I can repeat the procedure for next year to find out how much money I’ll need for *that*. This will help me decide, for instance, whether or not I want to get a part-time job to earn extra income until my mobile app development business takes off, if all the things I want to do this year are worth the money it will take to buy them, etc.
I’ll be posting more details about my 2011 adventures soon! I will also be coming out with a fun arcade-style game that will make it very easy to see how all this works visually and over time. Look for it here in 2012!