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Daily Capital

Reflecting On Your Final Budget of the Year

The end of the year is upon us.

As I gather with friends and family and reflect on the year, it’s a perfect time for me to consider my financial goals and aspirations. That work begins with me reflecting on my life, relationship with money, and closing out my budget.

Read on for my money saving budget tips.

1. Reflect on your relationship with money

The end of the year is a perfect time to reflect on your life as a whole and celebrate how far you’ve come.

How is your relationship with money?

Have you ever been embarrassed about your financial situation?

I know I have. I grew up in Indiana, and I didn’t live with my parents most of my life growing up. Throughout my childhood I bounced around and lived with several different family members and even family friends. When I started working at 14, I learned quickly to hold on to whatever little money I had. At 15, I opened my first checking account (under the account of my uncle) and learned how to use a check register to manage my paychecks from McDonald’s, where I worked at the time.

I’m thankful for my childhood because I learned how hard it is to earn a dollar and just how easy it is to spend it. I always think about my early experiences around money and how they’ve shaped my frugal nature.

I’m a firm believer that I must be open and honest about where I come from and where I am currently financially, so that I can take the appropriate actions to set myself up for a better financial future.

2. Assess your budget categories

In my opinion, the purpose of a budget is to spend as little as necessary on most expenses so that I can have more money to spend on the experiences I value. I also aim to invest in passive income streams. As silly as it sounds, my budget has become like a best friend, or bestie, because I communicate with it regularly and it knows everything about me and my finances! Tip: A good budget has totals for each category that are automatically summed for you. Personal Capital’s free financial tools will do this for you, and you can see how much you’re spending in each category, including custom categories you create for yourself.

At the end of the year, I review my budget category totals. I focus on the categories with the highest totals first, and assess if there is any way I can or would be willing to reduce the expense. As you can imagine, the highest expenses are usually taxes, housing, transportation, and food.

Taxes

Taxes are typically deferred when investing in certain retirement accounts, like a 401k. Seek professional advice to learn more about how tax-advantaged accounts work.

Housing

Housing is where some bravery comes into play. If you are uncomfortable with how much you are spending and not happy with how much you are saving, then you may have to make some tough decisions.

I know about this all too well.

When I divorced in 2017 and looked at my end-of-the-year budget, I realized I had to sell my 3,000 square foot house and move to a less expensive one. Believe it or not, I felt a big relief when I moved into a tiny 2-bedroom home with rent that was $1,000 a month cheaper than my previous mortgage!

You may not want to move. In that case, brainstorm ways that you can lessen your housing expenses or other expenses.

Food

Food is an area that (figuratively) eats up our budget. I constantly get asked, “How can I save money on groceries?” There are a few ways that I save on my grocery bill.

Here are my favorite tips:

  1. Try a low-cost food store. I shop at Aldi. If there isn’t anything I can’t purchase at Aldi, I head to a larger grocery store. Aldi has vegan, gluten-free, and organic food options for less.
  2. Make a list before you go shopping. I use a meal planner app. There are several free apps for grocery lists and meal planning. This keeps me on track while at the store, and I can easily check off my list as I shop.

3. Successfully close out your budget at the end of the year

Here is exactly how I close out my end-of-year budget.

I print out my checking account and credit card statements and look at each transaction. There are likely subscriptions and autopay items that you don’t use or need to check into. One year, I had a Netflix charge on my credit card each month of the year, but I hadn’t even subscribed to Netflix at the time! What subscriptions can you eliminate?

I once again look at my Budget Bestie overall for the year. I take note of what items are due at certain times of year (e.g. my auto insurance is due twice a year). I ensure that I am setting aside enough money in those months to cover the additional budget items. I also look at trends in my utility bills to make sure all is in order. If your water bill is slowly creeping each month, you could have a leak!

Last but not least, I examine my savings, retirement and investment allocations.  Then I ask myself a very important question, “Am I saving enough?”

If you are unsure, check out Personal Capital’s free financial tools. You safely link your financial accounts, and the professional-grade tools help you explore various retirement planning options. You can quickly see if you’re on track toward retirement, as well as how much more you should invest to retire early or meet other long-term goals.

Good luck with your last budget of the year!

Get Started with Personal Capital’s Free Financial Tools

Featured individual is a paid spokesperson and not a client of Personal Capital Advisors Corporation (“PCAC”) and does not make any endorsements or recommendations about securities offerings or investment strategy. The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Lakisha L. Simmons, PhD, is a Personal Capital Financial Hero. She retired early from her position as a tenured professor of business analytics at 41 years old. She is co-author with her 11-year-old son of "Divorced: 7 Keys to Making it Through Your Parents’ Divorce," the author of "The Unlikely Achieveher," and CEO of BRAVE Consulting, where she teaches women how to be happy, healthy, and wealthy. She enjoys traveling and spending quality time with her family. She can be reached via LakishaSimmons.com or on social media at @drkishasimmons.
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