Now that you have a better handle on your taxes for next year, take a look at line 22 “Total Income” on your Form 1040 (or the equivalent line on the “A” or “EZ”).  Yep, you really made that much last year.  Where did it all go?  Right now is a great time to start looking at how you spend your hard earned money.  You should have a solid three or four months of data for 2010.  Break your spending down into broad categories and look at the spending pattern.  Where is your money going, and is it going where you want it to (if you are looking for a budget planner, try the TedCo Software’s DebtDasher software)?  Maintaining a positive cash flow is the most important thing you can do to insure a solid financial future; conversely, a consistently negative cash flow is a near guaranteed road to ruin.  This may sound like a flash of the obvious, but nearly a third of our fellow Americans are running on a deficit.  The government can get away with it for a very long time, but we working (and unemployed) stiffs aren’t so lucky. 

Learning to stay on a budget is hard, but it is a needed step in the road to financial success.  Watching out for the little things means a lot.  We have all heard the stories about the ultimate cost of that Tall Latte (or Venti in my case).  As much as the latte habit, fast-food lunches, and fancy cable packages can hurt, they aren’t the real budget busters.  The big tickets are where most folks’ big problems really begin.  Over-spending on autos and homes, with their attendant big monthly payments, puts most people behind in the perpetual game of “get ahead”.  Try to make that car last a few more years and save up for the next (used) car.  Let somebody else spend all that money on a quickly depreciating new car.  While we are looking at this; do you really need a room for every man, woman, child, and pet in the family?  Don’t think just in terms of how much you can afford right now, but what you can afford if you lose one (or two) incomes.  How long will you be able to maintain payments if an income disaster strikes? 

What if you need all that room so you have some place to store your boat, sea-doos, motorcycles, rv, and trailers?  Well, you may need more help then just budgeting.  However, you’ll make me feel better about my venti white chocolate mocha habit.

Jim Heitman, CPF Jim Heitman, CFP®, is a writer, speaker, and Certified Financial Planning practitioner in Southern California.