(5 minute read)
It's January (yay!) and we eventually have to face the music. Post December expense tallying tends to be a bit more daunting than other months, as it's easier to spend askew during this time of year. Generosity is overflowing, occasions and opportunities to participate & spend are brimming, and we do not want to exclude anyone who might be in our line of reciprocity in thanks.
The fact remains: if we didn't save throughout the year, budget for this super-spend month and/or increase our cash flow, we likely have some financial rejuvenation & revitalization to be doing this next while as we get back on track. An injection of health, if you will.
Consider this financial refresh (apres hangover) a money spa-date. Once the task at hand is wrapped, I can safely say you'll feel way closer to a million bucks that you did at the start [of this exercise].
What we're going to do, is tee-up our Spotify premium account, toss on some comfy yet stylish digs, slather on a face mask and put on the tea kettle. Your Starbucks habit is going to hit the pause button until you know you're good to go in the beyond necessities spending camp since your wallet is bursting at the seams with all of those December-racked transaction receipts. p.s. Starbucks now has almond milk for when you are back in the extraordinary spending camp 😉
Here are 4 straightforward steps to recover from the financial hangover you are potentially experiencing as the recent aftermath that is December.
1. Assess the damage. Hey, the news might not actually be that bad! This is step one in knowing what you're up against. Open up your online accounts and check your bank and credit card balances. Are you in the black (cash flow positive) or are you in the red (cash flow negative)? Either way, I'm going to ask you to tally up the entire month's expenses and see where you've spent (overspent) in comparison to “regular” months of spend.
2. Look towards the common thread in your expenses. Now that you've had the chance to plug your expenses into a spreadsheet and assess the damage, it's time to look for patterns. It's likely you could have created a new spending habit in December that may unintentionally carry forward. I.e. going for coffee, lunch or dinner more than necessary. Stopping to pick up this and that at Sephora that you've run out of that you need, etc. Habits are subconsciously created just as well as consciously, hence let's be cognizant of where we're actually spending and get a handle on that which is unnecessary.
3. Implement short-term habits: create additional cash flow & cut expenses for the short term in order to bridge a gap in terms of making up what's been overspent. Maybe it's time to DIY your own mani, let your hair grow an extra few weeks, and cut back on “your fave groceries” that aren't the staples. Turn the heat down when you're not at home, put extra clothes on when you're there, and take public transit or walk (instead of paying for parking and gas). It's easier to cut back expenses than it is to earn more money, hence, start there.
If you are in a position where you can earn more cash, do so! Always. Even if not a business owner in charge of your own income you can raise short term capital by rummaging through your closet and selling things, by doing contract work or picking up a second job. Here's a post that has some tips on what to do in terms of cutting back expenses and increasing your income. Take a read.
4. Don't add to the pile. This isn't so much a tip as it is a rule, especially when dealing with overspend. Don't keep spending more. The obvious statement is true: the financial rejuvenation will only be further plagued, prolonged and get worse.
Remember that overspending is not the end of the world and that you can bounce back: there's hope. What I'd encourage you to remember is how long it takes to bounce back and how it feels in the process. Was the short term rush and the now longer term trade-off worth it? By creating a cash flow plan at the start of the year around your personal and business expenses and income, you'll better be able to capture a snapshot of what to save all throughout the year so January isn't a month to cringe towards in terms of financial health.
Tip: create a plan to replace the funds before you spend the funds. This isn't a December-only tip, it's a great one to follow all of the time. Before you spend money, always have a plan on how you're going to replace and pay it back.
If you need help, don't hesitate to reach out. As your financial mentor (and business coach) I'm here to help and have you feeling confident while understanding, sorting and figuring it all out.
Peace, love and happy cash flow accounting!