‘Tis that time to make resolutions. My bank sent me a newsletter with a financial checklist for the coming year. Let’s wander through the list and put it in perspective for an average person.

Identify your financial goals for the year.

What is a financial goal? Buy a new car, pay off your mortgage, increase your savings, reduce your credit card debt. The possibilities are endless. Just like other resolutions, we often make a list rather than a plan.

Just like starting a new diet, you need to know where you are now. Start by figuring out your total income and your total expenses. This can be a painful, but informative, exercise. Doing some analysis will help you gauge your progress with any financial goals

Pay off your highest interest rate debt first.

Most likely this is credit card debt. So the real conversation you need to have with yourself is how to control credit card spending so you don’t have credit card debt.

Set a goal of paying your credit card in full each month. Do whatever it takes to keep track of your credit card spending. Train yourself to only spend what you can pay when the statement arrives.

Create a financial emergency fund 

Let’s look at some numbers. If your take-home monthly income is $2,000, you’d have to save $6,000 to $12,000 dollars in one year!

While this is a standard item on financial checklists, I personally find it to be a daunting task that would discourage anyone who’s juggling bills and income. Who can save that amount, put it aside and not touch it?

If you have a fund of $3,000 to $6,000 available to you wouldn’t it be better to pay off that high interest debt? Then you’d have more money available each month, some of which could set aside for an emergency fund. I think that is a better plan.

Contribute to employer sponsored retirement plan

This is an excellent goal that helps you prepare for the future. The challenge here is in finding the money each month to make the contributions. Where is this money going to come from?

Look carefully at your income and expenses. Where can you start making some changes so you can increase these contributions? It make take some time to reduce some discretionary spending so you can use some money for retirement saving.

Create a monthly budget plan. A budget is like a diet, easier to set up but more challenging to follow. Managing money is somewhat like herding cats; everything keeps moving.  Each spending choice changes how much money we have for the future. Unexpected expenses throw a wrench in the money works, leaving us scrambling to make ends meet.

The word “budget” itself creates a mental picture of a straight jacket, something that is so constraining you can’t be at all comfortable. However, a spending plan based on your available funds gives you more flexibility and is a good idea.

Make a commitment to know more about your spending and your available resources. List your required expenses. Some of these are the same amount each month; others are somewhat flexible. Review these each month so you can get a clear picture of how much you need to allocate out of your monthly income for your basic needs.

Subtract these expenses from your total monthly income. Look at the amount that remains. List everything else that is not essential, but you want to spend money on. Now subtract that amount from the total. What does that number tell you?

In the end, managing money is all about the numbers. Keep reviewing yours and tracking your progress so you can get the most out of your money over the long term.