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Holiday Spending Got You Down?

The holidays are over and many are dreading opening their credit card statements!  Did you overspend this holiday season?  If so, the good news is that the New Year brings a new chance to make a change in your financial life to avoid this next year.

Change is hard!  But managing your money correctly will allow you to pay your bills on time, save for the future, and purchase what you need and want without breaking the bank.  The first step in money management is developing a spending plan.  This is a written document that outlines your financial goals.  One goal could be to pay off your holiday debts or save for next Christmas.  Whatever your goal is write it out and be specific.  How much money will it require?  What date do you want to reach your goal by?

The next step is to find out where your money is going each month.  It’s impossible to manage your money if you do not know where it is going.  The best way to figure this out is to track your expenses for at least one month.  What are your monthly expenses?  What do you purchase on a regular basis?  Include any purchased made with a debit or credit card and any payments made by check or automatic withdrawal.

Now, you need to figure out what income is coming in.  For a spending plan you will want to know what net income, income after deductions, is coming in.  Include all sources of income such as wages and alimony and any assistance such as food stamps.

Once you know how much is going towards expenses and what your monthly income is you can determine if you are spending more than you make or if there is any money left over each month.  Subtract your monthly expenses from your monthly income to determine this.  If you have a deficit you are spending more than you earn and should take a look at your expenses and determine if you can reduce or cut out any of these expenses.  Otherwise you will continue to overspend and it will be very hard to reach your financial goals.  If you have a surplus of income decide if you will pay of debt or put that money in savings to help reach your financial goals.

Once you have developed your spending plan review it regularly and make changes as needed.

For more information on this topic see the publication “Building a Spending Plan: All Six Steps” at http://edis.ifas.ufl.edu/he827