How I Use PocketSmith to Plan My Year Ahead

At the start of every year, household CFO and happy saver Ruth Henderson uses PocketSmith to plan her family’s finances for the year ahead. Budgeting, she says, is the key to financial freedom. Find out which three PocketSmith features she considers essential to helping her family achieve their money goals.

As the Chief Financial Officer of the family, I make it my responsibility to financially plan for the year ahead. It’s a New Year’s Eve money ritual that I look forward to each year!

This is the time when predictions become facts and I get to see how those budgets I set myself 12 months ago actually played out. The longer I have used PocketSmith, the closer my best guess gets to what actually happened. It’s common to see goal-setting on social media but there is a huge satisfaction to be found in setting a realistic budget with the help of PocketSmith, monitoring it throughout the year and then actually achieving it.

My New Year’s Eve Money Rituals

Every new year’s eve, I take a little time to reflect on the year just gone and think ahead to the coming year with a sense of purpose and control. That’s so important when it comes to handling your money. I’ll think about what specific goals we were striving to achieve and if we have met them or are on track to meet them.

I also set some new goals like:

Using last year’s weekly grocery spend to set a realistic budget for the coming year — one that we will stick to for once!
Keeping our self-employed incomes above a certain level
Setting money aside into sinking funds for specific costs such as a new phone, dental work, updating our car, or saving for a holiday
Making sure that our emergency fund has enough money to cover three to six months’ worth of expenses

It’s also a good time to make sure that long-term goals such as retirement savings are on track. Keeping an eye on big goals such as these, as well as your short-term goals, can help make sure that nothing’s gone awry.

The three PocketSmith features I focus on

I specifically use a few key PocketSmith features to close out the year and plan for next year. It never takes me long and it’s a time to reflect on our personal finances and talk as a family about what we spent last year and what we anticipate spending in the coming year.

PocketSmith helps my family feel completely in control of our money for all 52 weeks of the year.

This generally involves me at my computer ‘enlightening’ the family and playing a few guessing games along the lines of “guess what we spent on clothes last year” or “guess how much we spent on holiday in June”? It’s actually a fun experience as we get the chance to reminisce about our experiences throughout the year.

Then, once they have inevitably lost interest I start to focus in on four key areas:

I use the Income & Expense statement for the closing year to estimate our budgets for the coming year. This is the best place to track your spending and see your actual figures and it can sometimes come as quite a surprise that we spent more (on clothing) or less (on electricity) than we had budgeted for. It can also help show if you developed any bad habits and whether you need to reign in spending in those areas. Keeping an eye on this throughout the year can help make sure you’re on the right track to achieve your goals.
I also use our Income & Expense statement to work out exactly what we earned as a family in the previous year as that is a true figure. I can then use this information to set realistic budgets for the coming year, based on our income, that will help us stick to our New Year’s Eve resolution of always spending less than we earn and investing the difference.
I reset each budget category for Jan 1 to Dec 31 for the coming year. I reflect on what I spent per category last year and base my new budget on these figures. This is the time to drill down into each category and purchase, just to remind me what we spent and why. When I can see where we spent money I can then work out ways to save money in the new year.
I update my Net Worth for the final time, pulling together all of our financial data into one place to give me a final snapshot for the year. Using that figure I can then work out how our financial position has changed year on year. This final step is my highlight and I recommend it to others because this is where you get to see all of those small steps in the right direction add up to big progress, whether you are paying down debt or building up investments. It is very satisfying and a chance for you to congratulate yourself on being a good steward of your money! Perhaps you’ll find that your net worth isn’t progressing as much as you’d like and that your bank accounts aren’t achieving the high-interest rates you want. Having this information available can give you a better picture of how to achieve your personal goals in the year ahead.

A screenshot of annual expenses budgets in PocketSmith

Make budgeting your New Year’s resolution

If you have good intentions, yet no budget, it is impossible to track your progress. I find that those who are budgeting for the first time always get quite a surprise at what they actually spent, compared to what they think they were spending.

Using PocketSmith to plan my year ahead gives me guide rails for the coming 12 months. I can regularly check-in to make sure we are sticking to our resolutions. It is THE best way I have found to help my family feel completely in control of our money for all 52 weeks of the year, no matter what the year might throw at us, whether it be wonderful opportunities or big obstacles.

That, in my mind, is the definition of financial freedom.

Ruth blogs at thehappysaver.com all about how she and her family handle money. What’s the secret? Spend less than you earn, invest the difference, avoid debt and budget each dollar that flows through your hands. She firmly believes that if you can just get the basics right, life becomes easier from there on in.