Take a deep breath and prepare to face 2012 head-on. It is going to be our best year yet.
Begin by looking at your Form W-2 or 1099, the form you receive from your employer that shows the amount paid to you over the past year. Look at the amount shown and ask yourself, “Where did all that money go?”
If you don’t know the answer to that question, there is work to be done. Even if you are one of the very few who actually know where all that money went, there is still work to be done.
Take the amount shown, which is your gross income, and subtract all deductions on this form; this leaves your net income and the actual dollars that went thru your hands in 2011. Do you know exactly where it went?
Financial planners are fond of using the phrase “a flat tire away from bankruptcy” when describing families so strapped for cash that the slightest unforeseen expense, such as a flat tire, can push them over the edge into bankruptcy or homelessness. These unexpected expenses are the reason an adequate emergency fund is needed so do not fool yourself into thinking that just because you have a job and are managing well financially that circumstances can’t quickly turn your situation around. Life doesn’t advertise coming attractions. And, if you should be lucky enough not to need your emergency fund ever, that could make your golden years even more golden.