Welcome to winter in New England!  The good news is that winter has given many of us some extra time at home.  Why not use this time as an opportunity to organize and strategize?  As you wait for your end of year tax forms you can be setting up your financial files and do an overview of 2010 and plan for 2011 simply by evaluating the following categories:

• Income
• Spending
• Savings

INCOME should reflect all inflows of money.  That is, wages, dividends, bonuses, alimony, child support, rent and any other money that came into the household.  I do recommend categorizing by income source as it can prove to be quite helpful.  Next, list your expected income for 2011.  Although there are no guarantees that a bonus will be earned or even that a job will not change, use only the information you are sure of today. Remember that uncertain or unexpected received income can be added in as it occurs.  Income is where your planning begins.

SPENDING or expenses are outflows of money.  This would be anything you spend money on such as, mortgages, food, meals, entertainment, gifts, clothing, services and the list can go on and on.  If you purchased the item or the service, it is considered an expense regardless of whether you paid cash or credit.  Be sure to list your expenses for 2010 and again attempt to categorize it by monthly expenses – utilities, food, gas, mortgage and insurance- as well as your other expenses that occurred throughout the year - travel, memberships, clothing, etc.  

SAVINGS is income not spent.  This includes additions to a pension, retirement plan, bank accounts and investment accounts.  This is the category that is most important.  Remember, it is not the money you make; it is the money you keep!

Once you have completed this exercise, calculate the percentage to total income for both, your spending and savings for 2010.  Now ask yourself the following questions:

• Was I able to save?  Would it be possible to save more? 
• Are there expenses that could be reduced for 2011 that will increase savings? 
• How can I increase my income to meet my expenses and increase savings?
• Do I have a fund set up for unexpected expenses such as home repairs or a really cold winter which significantly increases heating costs?

If you follow these resourceful guidelines, you will be able to set realistic goals for your spending and savings for 2011!  In light of this analytic look at your financial life you have ultimately structured a budget.  It is wise to evaluate the budget monthly to see if you are on track.  I also recommend eliciting the help of financial professionals to aide in the planning and development of your financial future. 

A budget for 2011…..another good way to plan now to prosper later!

Please Note:  There are computer programs that can simplify the tracking and categorizing, one being Quicken. You may wish to see if the advantages outweigh the costs and if they are a fit for you.

By Barbara Case

Barbara Case is the Senior Vice President of Investments at Moors & Cabot Investments in Boston. Honored as a South Shore Woman of the Month--- for always giving back--- Barbara is now giving advice to the SSW community in her new financial column.