Set a Budget for the New Year and Stick To It
The start of a new year can see many changes. Out with the old and in with the new. Whether that be our diet or exercise regime or having a clear out of our wardrobe. Though we can make changes any time of the year, a fresh new year is always helpful and a good time to start. What changes are you thinking about this year? A lot of people will be looking for ways to saving money. Making a budget and then sticking to it, is key to save money or even clear some debt.
Have you thought about getting your finances sorted this year, though? It can quite often be neglected but setting a budget should be a priority. It will help you to avoid debt, or clear it if that is relevant to you. It should regularly be updated. Why? Our income and personal circumstances can change quite regularly. Our outgoings can certainly change too, so it is important to keep it up to date. If you are unsure on the best ways to set a budget, and importantly, to stick to it, read on.
It may take a little bit of time to work out your budget to start with. It is a good idea to keep receipts and bank statements. From these you need to calculate your expenses. How much are you spending each month? Make a note of the must-haves, like food, travel, insurance and utility bills. Look at what you are spending on everything else, including things like Christmas, birthday or valentines day gifts. If you can track back a few months, you can work out an average yearly spend. Divide that by 12 and then you have a rough idea of a monthly income.
Calculate your income is the next step. Using payslips or bank statements, work out how much you earn after tax. You should consider other forms of income you may receive too. If you get child support money or sell things online, add an average amount of that income, into the budget. An important thing to note if you are self-employed is to put aside the amount you will need to pay in tax, immediately. You don’t want to get behind on those payments. Set it aside and don’t touch it.
The next step is to set yourself goals. These could be paying off debt goals or savings goals. Perhaps both, depending on your circumstances. Take away the cost of your monthly expenses from your monthly income. This leaves you with what is ‘leftover’. This then determines how much you can put aside for savings or for paying off debt. It could even go towards a fund for something special that you want to save for.
If you find that you are overspending and spending more than you earn, you will need to make changes. Keeping your receipts or bank statements is another great way to check this. Note where small amounts of money go to. Are you spending $3 each week day on a coffee on the way to work? This can add up to $45 per week and over $2000 in a year. That is a lot of money. If you can’t budget it in, then cut it out, or make other changes. Thinking about needs versus wants is important when setting a budget.
Staying on top of your budget is key to sticking to it. It may be worth getting a notebook or a spreadsheet to track your expenditure and savings each month. It can so satisfying to tick off your savings goals or clearing your debt. When you keep a record of everything, I think it is less likely to result in splurging. Keeping a close eye on your finances will help you so much.
The most important way to stick to a budget is to be realistic. You don’t want to deprive yourself of certain things if you know that you will just go and get them anyway. It can be ok to get a little off track some months. Only if you get back on track and have some stricter months the rest of the time. It is like dieting, we all want something sweet now and again. Just make sure that it isn’t all the time.
Good luck with setting a budget this year. I hope that you will be able to reach your financial goals. The satisfaction of being able to save a significant amount of money is great. Clearing away debt will feel so much sweeter.