How Do I Set a Realistic Money Plan For The New Year?

Every January, a lot of people decide this will be the year they save more, pay off debt, or finally get ahead. The problem is that many of those resolutions are vague or unrealistic. When the plan is not grounded in real numbers and daily habits, it fades by February.

A realistic money plan is different. It’s:

1. Based on what you earn and spend
2. Clear about what you are trying to accomplish
3. Flexible enough to adjust when life changes
4. Built to protect you from the unexpected

Whether you’re an individual, a family, or a business owner, the steps are similar. You start by understanding your current situation, then design a plan that connects your day-to-day decisions with your long-term goals.

Step 1: Get Honest About Where You Are Right Now

You cannot build a useful plan without accurate information. Start by gathering the basics.

For individuals and families:

• Take one to three months of bank and credit card statements
• List all sources of income after taxes
• Categorize your spending: housing, utilities, food, transportation, insurance, debt payments, savings, and lifestyle expenses

For small businesses:

• Pull your profit and loss statements for the last year or last few quarters
• Understand your fixed expenses, variable expenses, and average monthly revenue
• List current debts, lines of credit, and cash reserves

This is not about judging your past decisions. Try to see where your money is going now so you can decide what to change.

Step 2: Define Clear, Achievable Financial Goals

Next, decide what you want your money to do for you this year and beyond.

Create goals in three-time frames:

1. Short term: the next 3 to 12 months
2. Mid term: 1 to 3 years
3. Long term: 5 years and beyond

Examples for individuals and families:

• Short term: build a 1,000 dollar starter emergency fund, pay off a credit card, catch up on dental or medical checkups
• Mid term: save for a car replacement, fund a child’s activity, increase retirement contributions
• Long term: pay off your mortgage early, reach a retirement savings target, plan for college education

Examples for small businesses:

• Short term: build one month of operating expenses in cash reserves, pay down a high interest business credit card
• Mid term: upgrade equipment, hire an additional team member, open a second location
• Long term: build a succession plan, invest in commercial property, expand into new markets

Make your goals specific and measurable. For example, instead of “save more,” set “save 300 dollars per month toward an emergency fund.”

Step 3: Build A Simple Spending and Saving Framework

With your current numbers and goals in mind, you can now design a practical structure for your money.

For individuals, one common starting framework is:

• Essentials (housing, utilities, food, transportation, insurance, minimum debt payments): around 50 to 60 percent of take home pay
• Financial goals (extra debt payments, savings, investing): around 20 percent
• Lifestyle (entertainment, eating out, subscriptions, travel): around 20 to 30 percent

Your exact percentages may look different, especially if housing costs are high or income is variable. The key is to give every dollar a job and make sure your goals have a line in the plan, not just your bills.

For businesses, think in terms of cash flow:

1. Project conservative revenue for each month
2. List fixed and variable operating costs
3. Decide what percentage of profit will go to debt reduction, reinvestment, reserves, and owner compensation

Then:

1. Automate what you can, like transfers to savings or retirement accounts
2. Set calendar reminders to review and adjust quarterly

Step 4: Protect Your Plan with Proper Risk Management

A strong money plan is not just about growth. It also shields you from events that can undo years of progress.

For individuals and families, this usually includes:

• Emergency fund: ideally 3 to 6 months of essential expenses
• Health insurance: to avoid medical bills that can derail your plan
• Auto and home or renters’ insurance: with coverage limits that match your actual risk
• Life insurance: especially if others rely on your income
• Disability coverage: often overlooked, but critical if you could not work for a period of time

For small businesses, think about:

• Business liability insurance
• Property and inventory coverage
• Business interruption insurance, which can help replace income if you have to shut down temporarily
• Key person life or disability coverage, if the business depends on one or two people

One major accident, lawsuit, illness, or storm can wipe out savings or push you into high interest debt. The right insurance strategy is an important part of a realistic money plan.

Step 5: Make It Ongoing, Not A One Time Project

A money plan only works if you use it.

Set up a simple rhythm:

1. Weekly or biweekly: quick check in when you pay bills or review transactions
2. Monthly: compare your actual spending and saving to your plan, then adjust categories if needed
3. Quarterly: revisit your goals, insurance coverages, and any major changes in income or expenses
4. Annually: complete review of your budget, debts, savings rate, and financial protections

Do not aim for perfection. Aim for awareness and progress. If one month goes off track due to an unexpected expense or opportunity, adjust next month rather than abandoning the plan.

Working with a financial advisor or insurance agent from the Matt Patterson Insurance Agency can help you prioritize and keep perspective, especially when you’re balancing multiple goals.

FAQs

How much should I have in an emergency fund to feel secure?

A common guideline is 3 to 6 months of essential living expenses for individuals and families. If your income is very stable and secure, 3 months may be enough. If you’re self employed, have variable income, or multiple dependents, 6 months or more is often wiser. For businesses, many advisors recommend at least 1 to 3 months of operating expenses, with more for companies in cyclical industries.

What is the 50/30/20 rule?

This is a popular budgeting framework that helps simplify financial planning. It suggests allocating 50% of your net income to “needs” (housing, food, utilities, insurance), 30% to “wants” (entertainment, dining out, hobbies), and 20% to “savings and debt repayment.” It’s a great starting point for those new to budgeting.

Should I focus on paying off debt or saving money first?

It depends on your situation. In most cases, building a small starter emergency fund comes first to avoid relying on credit cards for every surprise. After that, high interest debt, such as credit cards, is usually the priority because the interest rate is often higher than what you could earn by investing. At the same time, it can make sense to contribute enough to retirement accounts to capture any employer match, since that is essentially free money. An advisor can help you fine tune the balance between these goals.

How often should I review my insurance plan?

Reviewing your insurance annually is a good practice, and any time you have a significant life change. Examples include buying a home, changing jobs, getting married or divorced, having children, starting a business, or purchasing major assets. Coverage that fit you three years ago may not be enough today. Aligning your insurance with your current financial picture is an important part of keeping your money plan realistic and protective.

Do I really need a financial agent, or can I handle this myself?

Many people can handle basic budgeting and simple saving goals on their own, especially with modern tools and apps. However, when you’re balancing debt payoff, investing, retirement planning, college savings, tax questions, and risk management, professional guidance can save time and reduce mistakes. An insurance and financial professional can help you see blind spots, prioritize goals, and structure protections, so your overall plan is more resilient.

Turning Your New Year Intentions into a Practical Plan

A realistic money plan for the new year shouldn’t be complicated with spreadsheets or have strict rules that do not fit your real life. You should:

1. Knowing where your money is going now
2. Choosing clear goals that matter to you
3. Creating a simple structure for spending, saving, and debt
4. Protecting yourself and your family or business from major financial shocks
5. Checking in regularly and adjusting as you go

You do not need to have everything figured out this month! You simply need to start, stay aware, and be willing to make small course corrections along the way.

If you would like help aligning your insurance coverage and financial protections with your goals for the year, this is an ideal time to sit down with a financial agent at Matt Patterson who understands both risk and long-term planning.