Money Management in the New Year

2014-01-10   minute read

Lifestyle Debt

Not having a written down budget or financial plan is generally one of the first warning signs you may find yourself in financial difficulty. Having a plan in place ensures you are in control of your finances. Even if you are already concerned about your finances, it is not too late to work on your money management skills. If your resolution is to be debt free this New Year, the first step is to determine the extent of your current debt situation.

Making a budget is more than simply writing down your income and expenses. There are four main steps to the process of developing your financial plan.

Goal Setting

Before you begin listing your expenses, start by thinking about the expenses that are outside of your regular monthly budget. This could include building an emergency fund, saving for a new appliance or a trip, designating funds for car or household repairs or any other items that are not a part of your regular household expenses. Once you list out these financial goals, calculate when you need to purchase the item by and break the cost down to a monthly expense that you’ll either need to save up for before buying or be prepared to budget for once you’ve incurred the cost.

If your goal is to be debt free, list your existing creditors, the balance owed to them and the monthly payment required to pay them in full within your desired timeframe. By looking at these goals as a monthly expense, you can then build that amount into your regular budget to make sure the funds are available when you need them to be.


The next step in the process is to track your expenses. First, list your regular monthly income and expenses on a piece of paper. Tracking your expenses can be difficult as most people spend according to what is available in their bank account, rather than according to a controlled plan. It is important that for a few months you write down or keep receipts for everything you spend and track it against what you’ve budgeted. Don’t leave out anything - no matter how small.

Develop Your Budget

After you’ve set your goals and tracked your expenses, you can then look at finalizing your budget. Ideally, your expenses should not be more than your income each month. If they are, you need to look at ways to either cut back your expenses or increase your income. If you are covering your expenses, you can then assess whether your spending will allow you to reach the goals you set at the beginning of the process. Is there room in your budget to cover your additional monthly expenses so your goals are achieved?

By looking at your spending in each category, it can highlight the areas that are of concern. For example, what is the cost of carrying your current debt load? Are you struggling to pay down your debt? Did you use credit to cover the cost of groceries or gas because there was not enough money available to pay for everything? If these sorts of activities are happening on a regular basis, it is time to seek the assistance of a debt professional.

Putting Your Plan Into Action

Once you have a financial plan in place, you need to decide how you will make sure you’ll follow it. A budget is a blueprint for how you are choosing to spend your money. Determine what system you will use for keeping track of your spending and ensuring you are following that budget.

Some people use a cash system, where cash is withdrawn each pay day and separated into envelopes according to how much is allocated to each expense category. For example, one envelope could be labelled as ‘groceries’, which may include 30% of your pay. All grocery purchases will come exclusively out of that envelope. Others prefer to use their debit cards but may track their spending in a notebook on a regular basis. Choose a system that suits your skills and preferences.

The process of creating a budget can be overwhelming, but it’s a great way to start the New Year off right by taking control of your finances. If during this process you realize you may need to take stronger action to deal with your financial challenges, contact the team at MNP. We can help you create a plan that deals with your debt issues once and for all.

Make gaining control of your finances your New Year’s resolution. It is possible and MNP can make it happen.

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