How to Set Up Your Budget.
Are you looking at your spending from last year and wishing you had done a better job of staying on track or wished you had saved more? Maybe you just wish you didn’t have as many bills to pay off from Christmas spending? Now that it’s a new year, it’s time to start thinking about how you want to do things differently. A new year means a fresh opportunity to take control of your finances! For many people, reducing their spending and paying off debt is their number one New Year’s resolution. Having a well planned budget for the year will help you greatly in achieving your financial goals. Read on for some great tips on Preparing Your Budget for Next Year!
Isn’t it great that we get a fresh start in the new year? Although, really, any time is a good time to figure out a plan for your money!
How To Prepare Your Budget For The New Year
1. Evaluate Your Debts and Bills
Look over the bills you’ve paid in the previous year. Use old bank statements, online banking, or a software program like Quicken to do this. Start a tracking sheet of your choice (computer program, online or on paper) which lists each debt as well as monthly expense, their due date, and the minimum payment. I have a free printable simple budget worksheet here and a free debt snowball tracker available here to help you with this step. You should have a list of all your monthly and annual expenses when you’re finished.
2. Cut Down Your Expenses
Your monthly expenses should be scrutinized before your make your budget for the new year. Are you spending more money on eating out (here are quick meals to make instead of eating out) or groceries than you should? Take a look at 50 Things You Can Do To Save Money On Groceries for some money saving tips you can use today! Can you ditch cable and use Netflix, Hulu, Roku or one of the many other TV alternatives to stream shows and movies instead? Can you reduce your cell phone bill by changing plans? Maybe you can workout at home instead of paying for a health club membership. Have you called around to get new quotes for car and home insurance? Have you tried menu planning to reduce your grocery costs? Reducing costs will help you create a budget that works better for you and your family. A budget that will help you reach your financial goals!
RELATED: 25 Ways To Save Your Family Money
3. Decide How to Record Your Income and Spending
You need to have a method for budget recording that works for you and your family. It can be an Excel spreadsheet, using a budget binder or signing up for a financial tracker like Mint.com, Every Dollar, or a software program. No matter which you choose, make sure it is something you will keep up to date so money doesn’t go missing, a bill isn’t paid past the due date, and you don’t go negative with your bank accounts.
4. Create a Budget That is Realistic and Tight.
Once you’ve looked over your past finances and decided what you need to pay for in the upcoming year, start making a budget. It should have a long term plan (how the debt will be paid, how savings will be accrued, etc.) as well as a monthly sheet for your income and the expenses you routinely pay.
5. Start an Emergency Fund for Unforeseen Situations.
Another step in preparing your budget for the new year is to be sure your budget includes money going into an emergency fund. This money should ONLY be used for a true, unexpected circumstance. Family illness is an example. Christmas is not! Having $1000 in savings for emergencies will keep you from messing up your budget when you need to spend more money than usual.
6. Include Sinking Funds
Account for sinking funds, which will help pay for things throughout the year. I wrote a very easy to understand article about how to use sinking funds here if you’d like more in-depth information.
Sinking funds aren’t something most people create, but they should be! These funds are accrued on a regular basis in order to pay for something they know will need to be paid for in the future.
The holidays are a great example. We all know they occur in December, and that we will want to buy gifts, food, decor, and more. Putting just $20 each payday into a sinking fund for Christmas will give you a nice amount to spend once the holiday arrives.
Or car repairs. All cars need tune-ups and eventually will need tires, etc. Start saving for those expenses now and they won’t be “unexpected” when they happen.
Do you have a budget? If you don’t, now is a good time to gather your information so you can make one and start the New Year off right!
If you have a budget, share what method you use in the comments below!
Is it online, a computer program or paper & pencil? I track with a computer program, but do our budget the old school way with pencil and paper using the printable from my budget binder!
You might also be interested in: Get Out of Debt by Using the Debt Snowball System