Review your income and expenses in 2015 NOW. Yes, I know you don’t have to do taxes for a few more months but this is really important. Also label expenses or categorize them so you can see where your money went. Be brutal and don’t let anything get by. Can you tell how much you spent on designer coffee? How much for gym or classes? What was your overhead total? How much was spent on marketing?
Now go through and mark each expense as N. Necessary or NN. Not Necessary. Look at the N’s and see if all or part of that expense was not really necessary and mark it. N is things like rent, reasonable food, gas, phone, gas, car expense, etc.
Look at the bottom line. Did you make enough money to cover your expenses this year? Did you incur any debt? If so how much?
WHAT IF YOU COME UP SEEING THAT YOU DID NOT MAKE ENOUGH MONEY TO COVER YOUR EXPENSES????????
First, take another look at the NN expenses. How many can you cut out altogether or decrease? How many of the N expenses might be reduced, if even slightly?
When you have done this as Step 1, you will be able to see if you can set your 2016 goals to recover at least as much income as your 2015 revenue. If not, then onto Step 2.
This is about finding out how much more income you need to make in 2016. Look at your overall short fall for 2015. How much was that? Do you want to add any expenses to 2016? At this point, you need to figure out a good estimate as to what income you need to generate in 2016.
Some insightful authors have determined that to be at our happiest as attorneys we need to make $70,000 a year. Does this seem reasonable to you? This figure is, of course, balanced with having less income but more happiness and work/life balance. If you are willing to take this information at face value, it may be a place to start your next year’s budget. It means you won’t have so many goodies but more time to enjoy the ones you already have.
So, all of this is your decision. UGH
I have found that this is a really simple way to look at your financial situation. We’re not talking about saving for retirement or anything else at this point. Just how did you do money-wise last year. Debt reduction and proper savings come later. This exercise should be done at least once a year. Now is a great time.