During last week’s episode of the “CentsAble Chat” podcast, we discussed finding the “why” behind your financial New Year’s resolutions – and thinking through what it would take to reach your goals, from a mental and emotional standpoint. Then, you were encouraged to put it aside and go enjoy Christmas. So I hope you enjoyed the break, because now it’s time to get down to business!

The first step in budgeting – in any financial goal – is to create your financial picture. Liken it to your current location. If I ask you for directions, no matter where I’m going, you’ll ask me for my current location, right? Same thing. You can’t make any kind of financial plan, until you know the specifics of your current situation. So here are the steps to creating your financial picture:

1. Make a list of your income & expenses, plus pay dates & due dates for each – you’ll have to estimate in some cases, so use your bank and/or credit card statements to help you get a rough idea. HINT: Estimate low for income, high for expenses!
2. Total all your income, then total all your expenses. 
3. Subtract expense total from income total. 
4.  Make a list of all debt – including total amount owed, minimum payment, due date and interest rate.
5. Total the amounts of all your debt, then total the amounts of the minimum payments.
6. On a separate document, write the total amount of your income, the total amount of your expenses and the amount of difference between them.  Below that, write the total amount of debt owed and the total of all minimum payments. Finally, write down your total savings (not including investments or retirement accounts.)

Now, you have a detailed & summarized financial picture. Here are some questions you can answer with your financial picture:

• How much money do I need to make, in order to cover all my current expenses?
• Am I making enough to cover all my current expenses, without incurring debt?
• Do I need to make more money? If so, how much?
• How much money do I need to make, in order to survive?
• Can I afford to take a pay cut?
• How much debt do I have?
• Can I afford to pay off my debt?
• How much am I paying each month toward debt?
• How much money do I have, after covering my obligations, to put toward my financial goals?

The process to create your financial picture can be tedious, but hang in there! Once it’s done, making a plan to reach your goal will be MUCH easier and MUCH faster! When your financial picture is complete, pat yourself on the back for a job well done and take a  well-earned break! 

You have all the information you need to do this yourself – and YOU CAN DO THIS! But if it feels too overwhelming to tackle alone, help is always available!

Good luck!