Here's what I do to review last year's spending and get
ready to try again:
1. Run a budget versus actual report. Sometime in January, I run a Quicken Budget report (Reports-->Spending-->Budget). The menu entry says Budget, but the command creates a report that compares your budgeted numbers to actuals, as you can see in the screenshot. Change the Date range box to Last Year.
2. Look
for underbudget categories. I scan the Difference column for positive numbers
(black like the value for the Fun categories in the middle of the screenshot).
These represent categories where I spent less than I budgeted. Yippee! I make a
list of these categories and the smaller budgeted number I want to shoot for in
the current year. Sometimes, spending less than the budget is just luck. For
example, the car didn't require its typical amount of service or last year
included a prize of $500 worth of free gas. Don't adjust the budgeted numbers
when chances are good that the values will go back up this year.
3. Look
for overbudget categories. Next, I scan the Difference column for negative
numbers (red like Garbage and Telephone near the bottom of the screenshot). I
spent more than I budgeted in these categories.
There are three options for these categories. Increasing
the budgeted number is easy, but that might unbalance the budget. I make a list
of the categories where I want to restrain myself in the future. For example,
if my long distance phone bills are the culprit, I could research a lower-cost
option like Skype or turn to e-mail. Or I could carry a list that says "No more
clothes, dining out, bottles of wine" or the vice of the moment, so I remind
myself before I spend the money.
The third option is to do nothing. For example, the Home
Repair category in the screenshot missed by a long shot. But it's hard to ignore
a leaky hot water heater or a roof that needs replacing. The budgeted number
might be just fine. An emergency savings account is the perfect solution for
these unexpected expenses. In Quicken, a budget includes options for
transferring amounts regularly into savings.
4. Go
back and identify other categories to cut back. Back in
step 2, the easy cuts are categories where spending is less than the budget.
But some of these categories could be targets for further cutting. For example,
Dining came in under budget in the screenshot example. But, I might consider
cutting back on dining out even more to try to save more money for emergencies.
