While some people are busy setting their New Year's resolutions, I spend time making financial predictions about the upcoming year. After estimating my income and expenses, I set about organizing my finances for the New Year. According to a recent article by U.S. News & World Report, managing money better is a common New Year's resolution. Because I have an unstable job, I am cautious about how I save, invest and spend money. I had to come up with a drastically different financial plan for the New Year since January is when my much-higher health insurance premiums kick in. In addition to setting savings goals, I'm planning my budget, organizing my tax and investment paperwork.
Revising my budget
According to U.S. News & World Report, some experts spending 35 percent on home expenses; 15 percent on transportation; 15 percent on debt repayment; 10 percent on savings and 25 percent on miscellaneous. As a dual-income household, we can afford to spend $2,100 on housing; $900 on transportation; $900 on debt; $600 on savings and $1,500 on miscellaneous expenses by following these guidelines. However, if I lose my job, our budget would drop down to $1,400 for housing; $600 for transportation; $600 for debt; $400 for savings and $1,000 for miscellaneous.
Paying down our mortgage
One of my goals in the New Year is to pay down my mortgage while staying within our budget. By following our solo income budget, I have $1,400 for housing. We pay $900 for our mortgage and $250 for utilities. I may spend the $250 extra on home repairs, maintenance and lawn care costs. I plan to take $200 out of the $600 allocated for debt to put toward our mortgage debt.
Saving up for a new car
Our car payment is currently $300 a month, which leaves us for $300 a month for gasoline and oil changes. Our car will be paid off at the end of the year, which means we will have $300 a month to save for our next car. I plan to take $100 out of the "debt repayment," to start a car savings fund. That move brings my debt repayment fund down to $300 since I already removed $200 for extra mortgage payments.
Putting aside retirement money
Saving for retirement will be challenging if we only have one income. My husband contributes to his 401(k) and to a Roth IRA. On a solo income, we would need to divide $400 between his Roth IRA and a spousal Roth IRA for me. I'd allocate the remaining $300 in the debt repayment fund to his 401(k) since the $1,000 in the miscellaneous fund has to cover food, health care costs and clothing.
Because our emergency savings account is pathetically small, I'm keeping all of the money we contribute to our Roth IRA accounts in cash positions. My plan is to beef up our emergency fund with the money I earn this year with my full-time job. Ultimately, my financial plan for the New Year is to pretend that we only have one income while saving my income for the future.
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