This year Kezia Pearson will start a photography business to supplement her salary as a Buffalo teacher.
Sandra Bell will retire her credit cards and put away 10 percent of every paycheck to finally build an emergency fund.
And in 2011, Bryan Doornekamp plans to work longer hours and cease the expensive ritual of dining out five nights a week.
Many area residents are ringing in the New Year with a new mind-set and approach to their personal finances, as they aim to pry away their various financial albatross.
"By the end of the year, I want to have all my bills paid off," said Pearson, 35, of Buffalo. "I want to be debt-free."
From taking on side jobs to cutting back on the extras, people are starting the year with specific plans to save money, curb spending and reduce debt.
"We'll be cooking more at home, because it's cheaper and more healthy," said Doornekamp, also 35, of Fort Erie, Ont. "We'll lose weight and have more money in our pockets."
Personal finance goals usually top and dominate the country's New Year's resolution lists. Seventy-five percent of respondents in TD Ameritrade's recent New Year's Resolution Survey reported to have set at least one money-related resolution for 2011.
Local financial advisers said crafting a budget is a key component in improving your financial situation and can aid in adhering to and eventually realizing those resolutions.
"If you follow a budget or spending plan, you're less likely to squander your money and more likely to achieve your goals," said Amy Jo Lauber, the past president and current secretary of the Financial Planning Association of Western New York. "This is because you are actively choosing to put aside a certain amount of your cash flow to achieve your stated goals, rather than wondering where your money went."
Implementing and sticking to a budget can be empowering, enabling accurate tracking and management of finances, said Lawrence Pignataro Jr., a board member of FPA and president of Pignataro Financial Group in Depew.
"Your spending shouldn't control you, you have to control your spending, and a good way is with a budget," he said. "It is the only way to gain control of income so that it becomes a servant to you instead of you to it. It gives people a longer and overarching view of their financial life it helps them stick to resolutions, in that it breeds incremental success, and success builds upon success."
Bell, 38, of Toronto, and her husband have already created a spending strategy.
"We are on a budget now; we cut back on our entertainment, and I already see big improvements," Bell said. "I actually see where and how I'm spending my money."
Pearson doesn't have a budget, and Doornekamp says his attempts have been unsuccessful.
"We've tried, but it just never worked," he said.
Lauber said the word "budget" alone, which connotes restriction and deprivation, pushes many away from the process. So she usually refers to it as a spending plan.
"It's bitter medicine for people, but I like to think of it as a stress reducer because they're really depriving themselves of stress," said Lauber, who is also president of Lauber Financial Planning in West Seneca.
Know what you need
Creating a successful budget should be balanced with sufficient "needs" and "wants," with the ability to distinguish the two, financial experts say. Housing and utilities fall into the "needs" category, and vacations and the movies fall into "wants." But in some cases, the categories can mingle. Phones and clothing are "needs," but smart phones and designer duds are wants.
The budget should have some room for fun, but splurging should remain within the bounds of the plan.
Although he doesn't have a working budget, Doornekamp and his girlfriend, new parents to a 3-month-old, admit to being too heavy in their "wants" category. The couple has been shedding entertainment, no more drink nights at bars and they can't afford visits to Kissing Bridge, either. But they will still travel to Las Vegas in the spring.
"We can't cut back on everything; we're already not going to eat out like before," he said.
Budgeting options are plenty and the Internet is loaded with free calculators, spending tracking analysis, spreadsheets and other tools. But the old school method of slipping cash in designated envelopes every pay day for each expenditure is still popular. Pignataro himself has been doing a spreadsheet version of it.
The start of Pignataro Financial Group 24 years ago coincided with the end of his marriage, which signaled the beginning of child support payments.
While clients were few and income unsteady, Pignataro's financial obligations weren't. But with his weekly ritual of distributing his paycheck to his various spending categories, his finances rallied.
"It really works, I can attest to that," he said. "My form of budgeting is a hands-on, forward-looking process. So every time you're in the spreadsheet, you're working on financial freedom."
To ensure you are living within your means, spending categories should be appropriately funded. For example, financial advisers generally recommend saving 10 percent of your income, using 25 percent for housing, 10 to 15 percent for transportation, 15 to 20 percent for food and 5 to 10 percent for entertainment, Lauber said.
"You could spend a little more in one category but another one has to suffer," she said. "It's about making choices, and what's important to you and where you want to channel your money."
Housing and transportation costs are usually out of whack, with people spending more than they can afford.
"In this culture people spend more on status to make themselves feel a certain way," said Pignataro, who drives a 2003 Toyota Camry. "I'm over the car thing. A Camry is respectable enough. I don't need to impress anybody."
Pignataro said when clients live paycheck-to-paycheck and budgeting reveals their expenses exceed their income, cuts have to be made or income has to be increased with a second job. And when housing costs are beyond a budget, he suggests renting out a bedroom or the basement. Conserve energy to reduce the electric bill, cook at home, use coupons to lower grocery bills, and borrowing music and movies from the library are among the recommended cost-cutting measures.
Pearson doesn't celebrate Christmas, stopped adding pieces to her wardrobe and recently resisted her favorite fragrance, a $50 bottle of perfume, while at the mall.
But financial experts say the sneaky "latte factor" is doing in many good intentions to save, because a cup of coffee here, and a latte there, can accumulate to hundreds of dollars a month in spending. They recommend tracking your spending to reveal the impact to your budget.
"It's those piddly things that cause people to lose money, and they don't know about it until they play detective," Lauber said. "Your mortgage and insurance are obvious, but the little things, that bagel and coffee every morning, aren't. It never fails after they track their spending, people always come back and say they had no idea they were spending that much."
Reliance on credit cards continues to ruin spending plans, as does having a lean or nonexistent emergency fund. The presence of credit cards and the absence of a savings plan create a dysfunctional cycle that can lead to financial doom, financial experts warn.
"Pay off your highest interest rate cards as soon as possible," said Stan Lichwala, a local financial planner and president elect of the FPA. "Interest rates are outrageous, at 22 percent, 24 percent. That's just obscene."
Money equal to six months of living expenses should be saved, but "we are living in an era of immediate self-gratification. It's not like the old days, when you didn't have [money], you didn't buy it."
Lichwala said reducing debt and trying to save can seem defeating, but "don't get frustrated, don't lose sight of your financial goals."
Brenda French, a Williamsville resident, and her husband pay their entire credit card balance every month to avoid interest and reduce costs and maximize savings in other areas.
"I've been called cheap," the 50-year-old admitted.
But French also isn't fretting over money. And this New Year, like the one before, the French family will continue with their spending habits.
"We are always very careful with how we spend money, we don't have a lot of extra expenses, so nothing will change in 2011," she said.