Reviewing budget can avoid January financial hangover

The end of 2015 is coming at us fast. But there’s still enough time to blow the whole year’s budget in less than four weeks, so it’s a good idea to get a bearing on your finances now before waking up Jan. 1 disoriented, disheveled and dead broke. I can almost hear a collective sigh at the thought of trying to find the time during the holiday season to review your family’s finances. But allocating some time before year-end could pay off big in avoiding a dreadful New Year’s financial hangover.

Review retirement plan contributions

Contributions to 401(k) plans and Individual Retirement Accounts (IRAs) are tax-deferred, meaning you do not pay income tax on those contributed dollars until you withdraw the funds. Have you contributed as much as you can this year to your 401(k)? Do you need to increase your contributions next year? If your employer offers to match a portion of your 401(k) contributions, make sure you are contributing enough to get that match. Those are free dollars into your retirement account, a wonderful perk. Don’t forget about spousal IRAs for stay-at-home spouses. Although you have until April 15 to make contributions to your IRA for the 2015 tax year, now is a good time to establish a strategy for making these contributions and reducing your tax liability for this year.

How’s your emergency fund?

Is your emergency fund in its own state of crisis at year-end? Did you dip into it this year to purchase a new roof, a special vacation or Christmas gifts? You should have about six months of living expenses available at all times for unexpected financial hits. If some of those surprises happened this year and your fund is low, find ways to build it back up — perhaps through a revised budget.

Learn from your mistakes

So maybe 2015’s budget isn’t going according to plan. Look back and find where the budget fell short so you resolve those items in your 2016 budget. And don’t think of your budget as something that restricts you. Rather, view it as something that gives you control, choices and a sense of calm regarding your money and your lifestyle.

There are three primary reasons that budgets fail: 1) they are too strict (be sure to add a monthly cushion amount to your budget next year to account for the expenses that can’t be planned); 2) they don’t allow for high spending months (while some expenses don’t change from month to month, some months will have extra expenses, like December, so review every month of this year to pinpoint those months in your budget); and 3) tracking spending is exhausting (find a method that works for you, even if it is simply a quarterly recap).

Resolve to keep your budget moving and learn from setbacks. As with many of life’s endeavors, practice makes perfect. A great budgeting resource can be found at www.mint.com.

Put your goals in writing

Whatever your goals might be, you are more likely to achieve them if you write them down. Begin 2016 by writing a “financial blueprint” that outlines short-term (one year) and long-term goals (beyond one year). Detail what you plan to accomplish during that time, what resources you will need to succeed and how you can change aspects of your lifestyle to achieve these financial goals. Remember to be realistic about your goals and allow a little wiggle room from time to time. Check in on your list frequently to watch yourself progress!

Remember that if 2015 hasn’t been the financial success you wanted, don’t dwell on it, but resolve to move forward. Reflect on your accomplishments this year and continue to search for financial and personal satisfaction in the year to come. If you need help, talk to a financial adviser.

Phoebe Venable, chartered financial analyst, is president and COO of CapWealth Advisors, LLC. Her column on women, families and building wealth appears every other Saturday in The Tennessean.