The January Effect is the annual influx of Wall Street and other bonus, pension/retirement plan monies into the markets during the first month of the New Year. Bonuses for 2006 were quite astonishing but I remind you that I am located on Lackawanna Avenue, Totowa, not Wall Street, enough said. However, this is not that January Effect.

Happy New Year and my sincere best wishes for a healthy, prosperous and peaceful 2007.

As far as "healthy and prosperous" are concerned, when it comes to finances, much of that is in your hands. So, as the New Year begins, I have a six letter recommendation….B-U-D-G-E-T. I know very few people either in my professional or personal relationships that just can't wait to sit down and pour over the figures to create a budget, whether for their business, local Rotary Club or, perish the thought, own daily life. However, dear reader, by doing so now you will probably have made 2007 both more healthy and prosperous by the time next December 31st arrives. Just think, only 353 days to go!

Let's take a stab at "Budget 101."

1. REVIEW - You're going to have to do this sooner or later for tax time, so why not get it over with sooner.

a. Income - Unless you have a very complicated situation it shouldn't be too difficult to assemble your income items for 2005 - W-2 Salary and wages, investment, interest and dividend income, any outside 1099 income, etc. Of course if there are rental properties and the like that are recurring, good for you.

b. Expenses - Now the real fun begins. Perhaps the simplest way to go about it is to categorize your expenses into fixed and variable items.

i. Fixed - Of course this depends upon your personal lifestyle, holdings, etc. and you know what they are.

1. Household expenses - rent/maintenance, property taxes, utilities, mortgage or home equity line/loan.

2. Insurance - Auto, life, long-term care, major medical
No doubt you will think of other areas that you must plug in as you create or update your budget.

ii. Variable - Now you will need to be on your toes. There are innumerable items that fall into this category ranging from very important to "I can do without it." Here's a list of some, in no particular order of importance. Groceries, medical and dental, clothing, entertainment, personal care, vacation(s), auto fuel and service, gifts, tuition, subscriptions, savings, commutation, landscape maintenance and on, and on and on. You fill in the blanks.

2. PUT IT ALL TOGETHER - Now you have the vital information; the rest is easy, well easier. Now all you have to do is set up a format, spreadsheet ledger, whatever you like. If you use Quicken, the format is already in place. Now comes the really hard part…budgeting each item by month or quarter or whatever works best for you and then monitoring your expenses in each category. It's really not that difficult once you overcome "budget inertia." It can be as detailed as you wish, but try to include all the ingredients and then stay within the budget you have created.

This is merely a reminder of what you are probably already practicing. If you are not, January is just half over, so may I respectfully suggest you get into the "January Effect."