The start of a new year means it’s time to look back on your cash flow plan (aka budget) from 2018 and create a new plan for 2019.
A good place to start a review of last year’s cash flow is to see which, if any, categories came in over budget. Of course, I hope you don’t just wait until the end of the year to do this. Throughout the year, it’s best to be proactive in managing to the numbers in your plan. But still, some categories may have come in higher than planned.
That means one of two things. Either you were unrealistic in setting the budgeted amount and need to allocate more to the category in the new year, or you need to be more proactive about managing your spending in that category.
For us, one category where we overspent was gifts. One step that has helped us in this area is that we require our kids to pay for a portion of the gifts that are bought for their friends’ birthdays. Another helpful step is that we’ve divided our gift budget into two budgets—one that’s for gift-giving that happens throughout the year for birthdays, our kids’ teachers, etc., and one for Christmas gifts. With that second one, we transfer one-twelfth of our annual Christmas gift budget into a dedicated savings account each month. That way, when December rolls around, we have gift money already set aside.
But still, this is a category I’d like to see us manage more proactively, like buying gifts further in advance when we see items we know someone on our gift list would like that are on sale.
Another category that seems to creep up each year is groceries. But with three growing kids, that’s not surprising, nor is there much we can do about it since we’re already really proactive about our grocery shopping. So, we need to allocate a bit more to groceries in 2019.
Another step is to consider categories where you may have hit your numbers last year, but they’re likely to cost you more in 2019. For example, we already know our health insurance premium will be higher, so we’ve plugged in the new number. And we can expect to pay more this year for auto and homeowner’s insurance, although we pay those bills toward the end of the year so we’ll have to take an educated guess at the increases.
I generally think it’s a good idea to shop your insurance every few years. How long has it been since you’ve gotten estimates from other insurance companies?
Be sure to review your generosity from the past year as well. The historical biblical starting point of giving 10% is a good benchmark for such a review, but remember that it’s not intended to be a stopping point. Prayerfully consider what next step God is prompting you to take on your journey of generosity. Pray as well about where you’re giving. I believe your local church is an appropriate focal point for your generosity dollars. Beyond that, see what Christ-centered causes and ministries God puts on your heart.
Another step I Iike to encourage is thinking about which categories generated the greatest experiences for your family. For us, vacations are at the top of that list. We’re mindful that our kids will be grown and on their own in no time, and we highly value opportunities to make memories together. So we’re willing to do things like drive older vehicles in order to afford to travel.
Ultimately, a cash flow plan should be a tool that helps you accomplish your financial goals and gives you peace of mind. It shouldn’t be a burden. If the process of putting together your cash flow plan for the year feels like stitching together your own straight jacket, then something’s wrong.
Take a step back and think about what you’d like to accomplish in 2019. What goals are you most excited about pursuing? Do you want to take a special trip, begin supporting a certain ministry, or “just” experience the freedom that a little margin would bring? Let those goals be what motivates you to put together and follow a cash flow plan in 2019.
If you do, I’m confident you’ll see for yourself that a budget isn’t about less. It’s about more—more knowledge about where your money is going so you can be more proactive in managing money so you end up having more for what matters most.
Do you conduct an annual cash flow review? If so, how do you go about it?
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