How To Review Your Budget Or “Spending Plan” In 4 Easy Steps
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Whether you have spending regrets around the holidays or other “I shouldn’t have done that” type expenses last year, a new year provides a fresh start and allows you to make a better plan for 2022.

Step 1: Look Back – Evaluate 2021

Whether you use bookkeeping software (Quicken, etc.), budgeting sites (Mvelopes, Mint, YNAB, etc.) or paper bank and credit card statements, the first step involves looking in the rear-view mirror to see what happened the previous year. What was your total income for the year? How much were your expenses? Did you have a spending plan for 2019? If so, how did your plan compare to your ACTUAL results? Before moving on to 2022, you have to know what happened in 2021.

Step 2: Look Ahead – What changes do I see in 2022?

Spending plans are always changing because the variables that impact them are always changing. You’ve seen from Step 1 where your income came from and where you spent money. Step 2 involves seeing if that will be similar in 2022 or if there are changes you need to account for. Will your income change? Did you get a raise at work? Did you lose a stream of income you need to adjust for? Were there any one-time expenses you won’t encounter this year (i.e. the birth of a child in 2019, milestone anniversary trip, etc.)? Are there any NEW one-time expenses you’ll face this year (vehicle replacement, moving to a new house, home repairs, etc.)? Will any of your reoccurring expenses change (i.e. utility bill increase, rent/mortgage increase, insurance premium increase, etc.)?

You don’t know how 2020 will shape up, but you have to at least put a draft spending plan in order so you don’t get caught unprepared.     

“By failing to prepare, you are preparing to fail.” Benjamin Franklin

Step 3: Adjust – Make it Balance

Now that you’ve penciled in the income you expect and the expenses you need to plan for in 2022, it’s critical that we get these items to balance. The goal of any successful spending plan is to create positive cash flow margin. Cash flow margin is a key ingredient to helping you make progress towards meeting longer-term financial goals (retirement planning, education planning, charitable giving, debt reduction, etc.). 

This is where some of the hardest (but most impactful) work takes place. If your expenses are more than your income, in its simplest form that means you need to find a way to do three things: decrease expenses, increase income, or perhaps even both.

Decrease Expenses – paying for that monthly Netflix membership you rarely use? Still paying for the gym membership (you’ve yet to use) that you bought 11 months ago? Maybe your dining out expenses seem abnormally large?. Replace a dine-out meal (or two) a week with a meal at home. Cancel any unused or unnecessary memberships. There are many ways to trim expenses. Get creative and be realistic around what expenses you really use or need. Try to come at it with an open, objective mindset.

Increase Income – maybe you’ve cut expenses as best you can and the plan still isn’t balancing. Can you work to get overtime pay? Do you have a talent or skillset other people can benefit from that you can do on the side (teach piano, tutor kids, woodworking, dog-walking, etc.)? Are there things around the house that you can sell? There are many ways to generate a little extra income. Again… be creative.

Step 4: Don’t Do It Alone – Talk it Over

This step can easily be overlooked which can greatly diminish the effectiveness of a good spending plan. This step can also take many forms. 

First, in your family. If you’re married, the spending plan needs to be mutually agreed upon to be the most impactful. Both parties need to understand what the goals are and where the limits are being set. Whereas you might think this could feel enslaving to be “limited” to a spending plan, it should work to be quite the opposite and produce a feeling of freedom and unity with both sides understanding what’s at stake and where you want to head. If you have kids (probably 10 or older), bring them into the conversation so they know what the plan is for 2022. This can take some of the pressure off those last-minute expense requests for camp, concerts, costly birthday party experiences, etc. 

Second, tell someone else. Whether you or your spouse have a tendency to overspend or not, there is great benefit in bringing in a third party to aid with your accountability. Many of my clients have asked me to function as their “spending coach” where I can periodically check in on their spending plan results. If you don’t work with a financial planner, tell a trusted friend or neighbor who can lovingly check in with you 3-4 times a year on your progress. 

“Accountability is the glue that bonds commitments to results” – Will Craig

Remember…

Step 1: Look Back

Step 2: Look Ahead

Step 3: Adjust

Step 4: Don’t Do It Alone

Start the year afresh with a new plan, tell someone about it, and don’t be afraid to adjust it as things change (which they will) throughout the year. 


Are you part of the 23% of American Shoppers who felt like they overdid it with their 2021 holiday shopping?



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Smart Things To Do (That Many Won't) In A Down Market

By Brent Hoskins • July 13, 2022
When the stock market declines, the resulting steady drumbeat of negative news reports can drive many people to flee the markets. Making decisions out of fear (or any other emotional trigger) rarely leads to successful long-term outcomes. It's hard, because one of the most unsettling aspects of market downturns is the fact that they are out of your control. Here is a list of suggested actions to consider - which historically have resulted in helping to weather market lows. Tune Out The Noise It's ok to not check your portfolio balance when the market is falling. Turning off the financial news might be smart if it keeps you from making mistakes based on emotional decisions. Revisit Your Asset Allocation If you happen to be near retirement or in retirement, or if you simply lose sleep over downturns, you may need to reevaluate your risk tolerance. Together, we can figure out the balance of stocks and bonds best suited to your comfort level with risk and other personal circumstances. Control What You Can: Costs Expenses eat returns, and their bite is particularly painful during market corrections. We can explain options for removing high-cost investments from your portfolio in ways that minimize the taxes due from their sale. Set Realistic Expectations U.S. stock and bond markets have posted remarkable returns in the past few decades. Statistically speaking, it would be prudent to expect lower returns in the future. Together, we can develop a plan that still achieves your goals, despite potential headwinds of lower returns. Stay Diversified Downturns offer case studies in how different asset-class and sector exposures can help to insulate your portfolio. Having conversations about risk tolerance, as mentioned above, helps us to better understand your investing style and what's most important to you. With this greater insight, we can go over diversification options for your portfolio that blunt the impact of downturns while putting you on track to achieve your financial objectives. Remember, you don't have to follow the crowd and you don't have to make emotional decisions. Stick to sound investing principles, have a plan, and let us know if we can help. About the Author- Brent Hoskins is a Kansas City-area fee-only financial planner . Focal Point Financial Group provides comprehensive financial planning and investment management to help individuals and families organize, grow and protect their assets through life’s transitions. As a fee-only, fiduciary, and independent financial advisor, Brent Hoskins is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.

Chasing the Wind: The Futility of Materialism

By Brent Hoskins • July 1, 2022
Attempting to find meaning in "things" can often lead down a dangerous (and unending) path toward dissatisfaction and can put people in a vicious cycle of desiring more and more and yet feeling as if they never have enough. Solomon shares a number of helpful insights on materialism in the book of Ecclesiastes. I love the way author Randy Alcorn summarizes and paraphrases some of Solomon's statements from Ecclesiastes 5:10-15 : “Whoever loves money never has money enough” (v. 10). The more you have, the more you want. “Whoever loves wealth is never satisfied with his income” (v. 10). The more you have, the less you’re satisfied. “As goods increase, so do those who consume them” (v. 11). The more you have, the more people (including the government) will come after it. “And what benefit are they to the owner except to feast his eyes on them?” (v. 11). The more you have, the more you realize it does you no good. “The sleep of a laborer is sweet, whether he eats little or much, but the abundance of a rich man permits him no sleep” (v. 12). The more you have, the more you have to worry about. “I have seen a grievous evil under the sun: wealth hoarded to the harm of its owner” (v. 13). The more you have, the more you can hurt yourself by holding on to it. “Or wealth lost through some misfortune” (v.14). The more you have, the more you have to lose. “Naked a man comes from his mother’s womb, and as he comes, so he departs. He takes nothing from his labor that he can carry in his hand” (v. 15). The more you have, the more you’ll leave behind. So here we have someone (Solomon) who never lacked having enough money, concluding his remarks by stating: "When I surveyed all that my hands had done and what I had toiled to achieve, everything was meaningless, a chasing after the wind; nothing was gained under the sun" Ecclesiastes 2:11. Money is a tool... not something to endlessly pursuit, or you (like Solomon concluded) may just be "chasing the wind". About the Author- Brent Hoskins is a Kansas City-area fee-only financial planner . Focal Point Financial Group provides comprehensive financial planning and investment management to help individuals and families organize, grow and protect their assets through life’s transitions. As a fee-only, fiduciary, and independent financial advisor, Brent Hoskins is never paid a commission of any kind, and has a legal obligation to provide unbiased and trustworthy financial advice.