Budget - Analyze First

Arm yourself with information. It’s a key step in preparing your 2012 budget.

Look at your financial picture from last year.

How much did you earn? How much did you spend? What did you spend on?

  • Get the info. You may have a wealth of information at your disposal if you use tools like Mint or Quicken. If you are budgeting for a business, get reports from your accounting software. If you don’t have reports, gather year-end statements and last year’s bills and checks.
  • Organize the info. Sort from biggest expenses to smallest. Categories include:
    • Rent or mortgage
    • Taxes
    • Insurance
    • Education
    • Transportation
    • Food
    • Telephone, internet
    • Clothing

Think about what will change in 2012.

Do you have new financial needs or goals? Will you repay debt? Save? Reduce some expenses and increase others? Write down these changes.

Review the relationship between Income and Expense.

In my prior post, I noted that the relationship we want is: Income exceeds Expense. What is the source of your Income? What can you do to influence and increase it? How can you earn more?

  • Is it time to ask for a raise? Have you increased your skills? Are you adding more value to your employer? If you are, consider asking for a raise. If not, consider building your skills to position yourself for a raise or a better-paying job.
  • If you are paid by the hour, can you work more hours?
  • Do you want or need to work a second job?
  • Earning more Income yields powerful benefits beyond the financial.

Next Step

Congratulations. You’ve gathered and reviewed some of your recent financial history. Take a break. Next, we’ll create a 2012 net income goal.

This is the second of a series. Related posts:

  1. Budget to Earn, Earn, Earn
  2. Budget – Analyze First
  3. Budget – Begin with the End in Mind
  4. Is it a Budget or is it a Spending Plan?
  5. Budget for Yesterday, Today and Tomorrow