I see and hear it far too often. “My once a year expense is due next month and I do not have any money in savings. What do I do Max?”

Intro

Being a financial coach I hear the above statement almost daily from clients. If you are at this point it is not too late. With that being said I do not have an answer to that question that is financially savvy.

Now with that being said, I do have an answer on how to prepare for the next twelve months of your financial life.This post will touch on four habits that will help you be successful in personal finance. And maybe even other areas of life!

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Habit One: Tracking Expenses

The only way anyone makes any meaningful change in anything is by first having the knowledge of what has already happened. Now, the past cannot be changed. This is a fact. But, seeing how everything is interconnected in human life, the past is, at times, indicative of the future.

But (and that is a big but) the past does have to not define your future. You have the ability to make decisions to either create a positive outcome or a negative consequence. Ultimately, the decision is yours.

The first habit is surrounded by the premise of knowledge as the first piece of the puzzle. So, for the next 30 days track EVERY SINGLE EXPENSE. Yes, that was all caps worthy. From the cup of coffee, to fuel in your car to your rent or mortgage. In order to make any tweaks going forward, your current habits need to peak their heads out so we can see them for what they are.

Practical Application: Take a small notebook everywhere you go and jot down each expense. The receipt keeping madness simply does not work. I have about 15 receipts on the floorboards of my car with chewed gum in them and I’m certain you do too. The notebook stays with you and will be your reminder to notate all your expenses.

OR

You can snap a picture on your phone of each receipt and THEN put the gum in it. I really enjoy batching all tasks because I am not one for administration. At the end of the day, I will add these up in my notebook.

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Habit Two: Monthly Fixed Costs

Take into account all the fixed expenses you have. Here is a list of common fixed expenses for an individual or family:

• Mortgage or Rent
• Auto or Moto/RV Payment
• Cell Phone
• Electricity
• Natural Gas
• Internet
• Television
• Health/Auto/Life Insurance Premiums
• HOA Monthly Dues
• Prescription Drugs
• Health Club/Gym
• Trade Clubs/Community Groups/Associations
• Magazine/Book Subscriptions
• Childcare Expenses (if fixed)
• Retirement Plan Contributions

Add all these up and notate them.

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Habit Three: Monthly Variable Costs

Do the same as above for the expenses that change from month to month.

Again, here’s a list of the common variable expenses:

• Fuel/Gas for Vehicles
• Groceries
• Restaurant Food
• Concerts/Events
• Entertainment
• Pet Food
• Clothing

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Habit Four: Periodic Expenses

This is where forecasting begins. But you are going to forecast how the weather is going to be in Los Angeles in July. The answer is obvious: sunny and bright blue skies.

These period expenses are the ones you already know about. Here’s a small sampling of some periodic expenses:

• Vehicle Registrations
• Vacations
• Birthdays
• Mother’s Day
• Father’s Day
• Anniversaries
• Home Property Taxes (if paid outside of mortgage/escrow account)
• Back to School Shopping
• Sporting Event Seasons
• College/Private School Tuition (paid per quarter/semester)

A simple example is vehicle registration.

• Car registration: $240 yearly due in one payment
  • 240/12 months = $20 monthly

That $20 each month now will be added to a separate savings account that will now be the periodic expense savings account.

Now, when the car registration is due, you will transfer the $240 from the periodic savings account into your checking account and pay it.

No credit cards, no stressing, no guessing on how you are going to pay the $240. You were proactive and now live without stressing about these expenses.

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Aside: Reactive vs. Proactive

Being reactive means this. As the bills/expense come you deal with them when they have already occurred. You fix something after it is already broken. You find difficulty in paying for irregular expenses because you have not prepared for them. This reactive behavior creates financial stress and makes you feel really anxious. But that is not the end of the story.

There is another way. Being proactive.

Being proactive does a few things for you. As you begin to track expenses you will take personal responsibility for your personal finance. At which point you will have a sense of control and power over your money. You will choose where your money is to go and money will not have a vise grip over you anymore.

When someone comes to this point they feel rather empowered with their personal finance. And when someone feels empowered about finances speaking about money actually is a stress relief because we know what we are to do and have control over our actions. And that is what I want for all my readers, clients, friends and family: that peace of mind. I have seen it time and time again when money is a part of life it is not consuming all your vitality and life.

Conclusion

The fact of the matter is when you start involving proactivity to your financial journey you will begin to see ways to change in a positive manner. I’m looking forward to hearing about success and proactive tendencies across your life.

What’s your thought on forecasting? Do you forecast for more than a year? What works? What doesn’t work? Make sure to leave a comment and perhaps suggestions on what works better!

Always Moving Forward,

||| Max