The New Year is the perfect time to reevaluate your budget! With so many financial changes in 2020, 2021 is a great opportunity to improve your financial well-being. Budgeting can help you properly allocate your money for your expenses, savings, and spending. If you have any specific financial goals like paying off your student loans or saving up enough for a down payment on a house, a budget is the perfect way to help you pursue those goals. If you are looking for tips on budgeting in the new year, keep reading!
Make specific goals
Whether you want to become debt free or cut back your frivolous spending, having specific goals might make them more attainable. Use the SMART goal template to put together your budgeting goals. Each goal should be specific, measurable, attainable, relevant, and timebound. Having these goals to work towards may help you stick to your budget.
Review your 2020 spending
While 2020 was a crazy year, you will want to look through your previous transactions to analyze your spending habits. Your previous monthly spending will allow you to create a good basis of what your budget needs to look like to best fit your needs.
Start with your income
How much money are you bringing in each month? Starting with your monthly income will allow you to see how much money you have to budget. Your income includes work from your job, any side hustles you have, and any other money you collect each month.
List out all of your expenses
From rent to your Netflix subscription, create a list of your monthly expenses. This allows you to decide which ones are necessary and which ones can be canceled. After canceling the unnecessary expenses, you can subtract your expenses from your income to see how much money you have left each month.
Decide how you will keep up with your budget
Many people use digital budgeting tools that can connect to their bank account, credit cards, and savings account directly. These tools make it extremely easy to check your budget standing quickly and if you are on track or not for that month. If you are not a digital person, you could also use a handwritten budget. Be sure to update your budget consistently so it remains accurate.
Create an emergency savings account
If 2020 taught us anything, it is to expect the unexpected. To prevent a major unforeseen cost having to come out of pocket, you will want to have an emergency fund. An emergency fund should typically be enough money to pay your bills for 3 to 6 months. As you work on building an emergency fund, $1,000 is a good starting point of money to set aside for a rainy day.
Budgeting is a great way to pursue your financial goals and it is never too late to get started! Keeping up with your budget is the hardest part, but staying motivated is key. Having goals and limiting your spending will improve your overall financial well-being. To learn how Money Pros can help, give us a call at (402) 454-7204 or email me at firstname.lastname@example.org.