If saving for retirement, paying off debt or simply finding financial freedom are part of your resolutions for this new year and new decade, it’s important to set realistic goals and commit to them from the very beginning.
Setting a realistic budget requires research, and a careful look back at your spending over the last month and year. Once you have a clear picture of where and when you’re spending money, you can create a budget with money coming in and money going out. Begin with fixed expenses, and track your spending month to month to set reasonable goals for more flexible expenses like dinners out or travel. Once your budget is set, prioritize saving and limiting needless spending, and you’ll be well on your way to achieving your financial goals.
Here are several tips to help you start and stay on budget in the new year.
Just as you wouldn’t want to commit to losing 50 pounds in 2 months, it isn’t wise to set financial goals that are unattainable or require enormous, immediate personal sacrifice. Your budget should challenge you, while also fitting your life and making room for you to do what you love without feeling restricted. Evaluate your spending from last year, and make a note of times when your spending increased or decreased. Use this information to inform your budget from the start.
Monthly Budget Set
Once you begin creating a budget, you’ll want to begin with all available monthly income, followed by fixed expenses. Look at your goals and be honest with yourself about where you can cut spending from your flexible expenses, and try to give yourself wiggle room while challenging yourself to stay on track and save.
Track Your Spending
The most important part of a budget happens in the actual spending and tracking, and you’ll want to be closely monitoring your spending, week to week. You don’t have to be too granular here, but it can be helpful to set aside a day each week to review your expenses and note where you may be on or off track, to help you adjust for the week ahead.
The best way to stay on track toward your financial goals is to make sure you don’t end up going into debt along the way. Begin an emergency savings account, and try to keep it growing, month to month. You’ll want to begin with enough savings to get you out of car trouble or pay for an unexpected medical bill. Aim for $1,000 to $2,000 to start to be safe.
We know it may not sound like a money savings tip, but decluttering is an important part of monitoring what you do and don’t need. Also, while eliminating items you no longer need, you might find things worth consigning or selling, giving you an additional source of income in the months to come. Clearing clutter from your desk and living spaces allows you to think more clearly and stay mentally healthy, making it easier for you to stay motivated and committed to your goals.
Cut Coupons/Shop Sales & Secondhand
If cutting your grocery bill feels impossible, or you know your little ones will need new winter coats and summer clothes soon, consider shopping sales, cutting coupons and even shopping secondhand. You’ll save instantly, and learn a few new tricks to help you as your shopping needs continue throughout the year.
Pick Up a Side Hustle
If you find that cutting spending is limited, it might be time to consider picking up a freelance or side job to help bring in an extra stream of income. Take up teaching music lessons, pick up a weekend shift at your nearby coffee shop or offer your services as a consultant during your time off of your full time job. Be sure that your side hustle doesn’t conflict with or cut into your full time job before you begin. Once you’re in the clear, you can bring in hundreds of additional dollars a month that can be put toward paying off debt or saving for the long term, simply by working a few extra hours each week.