As the year draws to an end, it is time to begin our end of year planning.
Every year, during the last week or two of December, Mr. Bean and I sit down and go over our goals and plans for the following year:
- Financial Goals
- Insurance and Other Bill Comparisons
- Homeschool/Kids’ Activities
- Vacation Plans (thanks to Covid, these have not exactly worked out the last few years)
- Business Building Goals
Financial Goals
One of our biggest financial accomplishments has been maxing out both of our Roth IRA accounts for the last 2 years!
We’ve done this by:
- Making regular automatic monthly investments, directly from paychecks
- Putting in our tax returns
- And adding any “extra” money that we receive throughout the year. (Gift monies, Overtime Pay, and any money I earn from my part-time realtor job)
These Roth IRA contributions are in addition to the regular 401k contributions Mr. Bean makes at work.
(We have not maxed out his 401k contributions yet, as we want to keep more money in taxable brokerage accounts for possible early retirement access.)
Building a Financial Plan for Next Year
Begin by gathering your current and planned future finances:
- Household bills
- Rent/mortgage payments
- Utilities
- Insurance Payments
- Expected Expenses
- Medical Co-Pays
- Car Maintenace
- Home Maintenance
- Holiday/Birthday Gifts
- Clothing
- Childcare/tuition
- Average Groceries
- Fun Money (No matter how tight your budget is, always try to include some form of fun money. Even if you can only afford a few dollars a month. That night out just enjoying a scoop of ice cream can keep you going towards your financial goals.)
- Any Debt Payments
- Student Loans
- Car Loans
- Credit Cards
- Other Loans
Gather your expected income from primary jobs, pensions, disability payments.
Now compare your expenses to your income and make a plan for Next Year!
What’s your Plan?
Do you want to:
- Pay off debt?
- Build your emergency fund?
- Save for a large purchase, like a house or car?
- Increase your retirement contributions?
After looking at your estimated income and expenses, what do you need to do to achieve your goals?
One of the easiest things to do is eliminate excess expenses from your life.
What are you spending money on that you could do without and hardly notice?
- Excessive Target Trips
- Lots of eating out
- Cruising Amazon late at night
- Paying for subscriptions or memberships you don’t use
(I totally found a $125 monthly membership last month that Mr. Bean had stopped using. Check your auto-pay bills)
These types of expenses are usually just because of boredom or laziness. Find something else to help you unwind and doesn’t tempt you to spend extra money, just because.
Shop Around
When we first got our own phone plan together in the late 2000s, we used a big company like AT&T, because that’s what we’d always known.
But I hated spending over $100 a month for phones that we hardly used. I heard about Republic Wireless from Mr. Money Mustache’s blog and realized how much we could be saving.
By switching from AT&T to Replublic, we went from $120 a month bills to only $45! It was a pain to make the changeover but the monthly savings over the years made it totally worth it.
Nowadays there are all sorts of low-cost phone plans like Tello, Mint Mobile, Boost, and a bunch more.
Shop around for everyday bills you’ve gotten used to just paying and see if switching can help you bring down your bills.
- Phone
- Internet
- Cable (Cable is such a ridiculous bill these days, we just use one or 2 subscription services a month and rotate them out. Or use free movie sites)
- Car Insurance
- Homeowners/Rental Insurance
- Life Insurance
Use this end-of-the-year planning to shop around and change plans where it makes sense.
Maybe make a list now and do the shopping and changes in January when the Holiday season has calmed down. You’ll need to spend a few hours filling out applications and making phone calls but the savings can be huge.
Kids Activities
If you’ve got kids, you know they come with expenses.
- Tuition
- Childcare costs
- Extracurricular and sports activities
- Summer Camp
- School Vacation Childcare/Camp
- All on top of food, clothing, medical, and shelter
Look at your costs for the past year and plan for them for next year.
Kids’ Activities are Expected Expenses we plan for and keep in a separate account. By putting a little away each month, Summer Camps aren’t as hard to swallow.
If you are noticing your Kid Expenses are getting out of line, maybe really look at how much you have them doing?
We know some kids who have full school days at a private school (40 minutes from their home), then go straight to 1 or 2 extracurricular activities every afternoon AND on Saturdays, with Bible School Sunday. I don’t know how they do it.
All I can think is ‘These are the kids you read about who end up having a mental breakdown in high school and college.” There’s just so much on their plate, they can never relax and decompress.
And to think about the amounts of money these parents are spending every month on activities floors me!
We personally homeschool our kids, it just works better for us.
They are involved in multiple activities but we purposely make sure they have time to chill and just play.
So go through your budget and figure out your child’s expenses and plan for or change them if needed. A little bit of planning now can save some huge headaches later in the year.
And as I’ve said before, we love the FREE Parks and Rec classes offered near us. We also work with local schools to get free or discounted activities. It’s all about finding balance.
Vacations
As the year is wrapping up, it’s fun to think about the types of vacations you want to take with your family, significant other, friends, or even on your own.
What are your dream vacations?
Price them out and see what it would take then begin to save up for them.
Usually, we try to get to the mainland (we live in Hawaii) at least once a year to visit my side of the family and maybe a staycation or 2 on-island.
We’d love to incorporate a second, not-just-to-visit-family trip each year, so we have upped our monthly vacation savings a little over the years.
At this point in our lives, we might not get to have that second trip EVERY year, but we are doing what we can. We’re also trying to figure out how to create extended family visiting trips to include a bit more travel. (Flights to and from Hawaii get expensive for 4 people)
So sit down and think about what you want, and what you can do this coming year. Also start planning for dream trips in the future. Figure out how much it will cost and how you can save that money, even if just a little bit at a time.
But please do not just throw a lavish vacation on a credit card and plan to “pay it off later.”
Needing to relax and experience new things is important but don’t put yourself in debt to do it. Just go for local day adventures if you need to for now while you build up your cash pile for bigger future vacations.
Building a Business
Have you been thinking about starting your own business?
Maybe something as simple as a dog walking service you can do in the evenings. Or as complex as your own advisory firm.
Whatever idea has been floating around in your head, take some time to write it down and see what it will take to make it a reality. Then decide if you actually want to make the move on it.
- Write a business plan
- What will your business be?
- Who will your customers be?
- How can you market to them?
- What will it cost to start the business?
- What will it take to make the business profitable?
- Etc.
If you have a great idea and it looks like something you can tackle, make a plan for what you will do next year to make it happen.
- Start saving up for business expenses
- Build your website and Social Media to get the word out
- Get any training or certifications you will need to be legit
- Etc.
Plan it out and start. Keep your current job while you grow your business on the side and see where it takes you.
Wrap-Up
As the year comes to a close, creating a basic plan for next year always makes me feel much more in control.
- I set up or make changes to all my automatic transfers or payments (Maxing out those Roth IRAs!)
- Take a few minutes to shop around for better-priced services (sometimes we already have the best price for insurance, so we just keep it, knowing we have a great price)
- Plan out some field trips and vacations
- And now that we are looking to start a few businesses, plan out what our S.M.A.R.T. Goals for the year are
So take a few hours, during those quiet hum-drum days between Christmas and the New Year to start a plan for next year.
Make it a date, either with your significant other or just yourself. Pour a glass of wine, steep a cup of tea, or whatever gets you in the mood. Grab some of those leftover holiday cookies and start planning.