New Year New Budget: 5 Things to Consider
If you want to start the New Year off on the right foot, then you might have some planning to do. Budgets can be an incredible tool to help you stay on track towards your financial goals, but many of us have trouble sticking to the ones that we set for ourselves. Now that the new year is finally here, it’s the perfect opportunity for you to implement a new or improved budgeting strategy that could better-suit your lifestyle, and set you up for long-term success.
Before you promise yourself that you’re going to get a handle on your spending and make sure that you’re saving more this year, keep the following tips in mind to design a budget that will last all the way through to 2019.
1. Understand Your Income
Before you can successfully develop a budget for the New Year, you’ll need to begin by looking over the bank statements you’ve gathered over the last twelve months to figure out what your full gross income looks like. This is a great way to make sure that you know exactly where each of the pounds in your budget is going at the end of each month.
Write everything down or a piece of paper, or enter it into a spreadsheet (you can do this for free with Google Sheets), and take a few moments to think about anything that might change in your income during the year ahead. For instance, if you know you’re getting a raise in February, then you might want to take that into account.
2. Start Thinking about Your Expenses
Once you know how your income works, you’ll be able to start thinking about your outgoing expenses. Just like you did with your incoming money, write down all your regular monthly obligations in terms of cash with their £ amount in full. Make sure that you remember things like your car payments, your rent or mortgage, your electricity, your water rates, your gym memberships, and your Netflix subscriptions.
Once you’ve finished recording all the numbers you can rely on to stay the same, you’ll be able to move onto things with more fluid expenses, like entertainment, food, haircuts, and dental bills. Look closely at this list, and consider how you can get rid of anything that you don’t absolutely need. For instance, if you find that you’re only watching TV on Netflix, you probably shouldn’t be wasting money on your cable.
3. Work out Your Financial Health
When you’ve got a complete overview of your incoming and outgoing expenses, subtract the income that you get every month from the amount you spend. If you’re spending more than you’re earning, then there’s a problem. If you’re not spending more than you bring in, think about whether you’re leaving enough cash aside for savings and unexpected expenses.
The good news is that even if you’re looking at a negative figure at the end of all your planning, the New Year is the perfect time to start getting rid of some bad habits.
4. Begin to Develop a Realistic Budget
A basic understanding of your financial health should give you enough information to set a realistic budget for the year ahead. Remember, the key is to spend as little as possible while still having some fun in your life. Ideally, you’ll be able to pay for your utilities, your rent, and all your other essential bills, while leaving a little bit of money over for frivolity and savings too.
If you’re struggling, remember that there are always ways to reach your financial goals that you might not have considered up to now. For instance, could you benefit from potentially changing your energy supplier, or cutting your Netflix subscription out of your monthly bills?
5. Make Financial Planning Part of your Schedule
Finally, even if you’re perfectly happy with the way that your budget looks un January 2nd, that doesn’t mean that you won’t need to make any changes to it as you move throughout the rest of the year. A budget requires consistent work if you’re going to stick to it, so make sure that you devote at least one hour a month to thinking about your expenses and how you can improve the way that you spend.
Remember, you’ll need to make some serious changes if a big event in your life causes you to start re-thinking the way you use your money. For instance, if you get a better job, or lose your career, your budgeting needs will change.
