2017 Money Resolutions: Creating a Budget and Sticking to It
January 12, 2017
Adrienne H., Financial Expert
It’s the beginning of a new year, which means, it’s time for more money resolutions! This year, I am going to share how to make a budget that works best for you.
Step 1: Understand Your Income
Take a look at your paycheck to figure out how much you make after taxes. If you don’t have a consistent income, try to estimate your average monthly income. However, be realistic about including variable income including commission, overtime, bonuses, and tips.
Step 2: Track Your Expenses
Before you set your budget, determine how much you are currently spending per month. Let’s start by estimating the necessities – lodging, utilities, food, clothing, and transportation. Next, add in your entertainment, savings, and emergency costs. Throughout the next two months, track the actual expenses of each of those items.
Step 3: Create a Budget
After tracking your actual expenses for two months, it’s finally time to create your budget. You may find that your actual expenses are much more than your estimated dollar amounts. If you want to cut down on your spending, set goals for yourself by creating spending limits for certain areas like restaurants or clothing.
To help you easily track your spending and goals, you may want to use online or mobile money management tools, such as Mint. Through these tools, you can set up alerts to notify you if you are about to reach or have reached your budget limit in certain spending areas including groceries, utilities, and more. If you decide to use a digital financial service, make sure it is safe and secure.
Step 4: Give Yourself an Allowance
If you’re trying cut back on your spending habits, but you love to buy new, exciting items for yourself or others, set aside money in your budget to treat yourself. Often times, it’s hard to stick to a budget because you may not plan to give yourself enough money for items that aren’t necessities.
Maybe you love buying delicious lattes every day or trendy, new clothes, but you set goals to cut those expenses from your budget because you don’t need those items. Remember, it’s okay to spend money on items you want once in a while. If you have money set aside for your “wants,” you won’t have to break your budget plan and it will be easier to stick to your financial goals.
Step 5: Keep Your Budget Updated
A lot can happen in a year that may affect your budget. You might have unexpected medical expenses or a new job with a higher salary. If big budget factors come into play, revise your budget to fit your needs throughout the year. This includes seasonal utilities, too! For instance, right now my electric bill is relatively low compared to my bills in the summer when I use air conditioning. Once I turn on my air conditioner, I will have to update my budget to allot for the extra utility costs.
If you have questions or need help with your financial plan, remember, you can contact us — we’re always happy to help.