With the new year, it's time for resolutions. Many people will be resolving to diet and exercise, to learn a language, or to read more often. But you might be resolving to be better with your finances. This is a complicated area that differs from person to person, but there are still a few guidelines that can help you with your new resolutions.
1. Start budgeting by recording what you spend within a month.
Use this time to take a step back and examine what you're spending where. You can wait a month or a pay period and record what you spend to get a baseline. Or you can pour over your past recents and bank records to see the big picture. This step will be very helpful when you start determining your personal budget. Knowing your fixed costs allow you to determine your discretionary spending limits.
2. Be prepared to adjust your budget within the first month or two.
This really goes for all kinds of resolutions. Most people set their sights a little too high and become discouraged when they're not reaching their goal. Don't expect an immediate, drastic change. Instead, ease into your new spending habits. Weaning yourself off of your old budget will allow for a much smoother transition. Setting more realistic and flexible expectations will also make it that much easier to stick to your new budget throughout the entire year.
3. Make room for unexpected bills or sudden changes in income.
However, not all costs remain the same. You might have an unexpected car repair or medical bill. You also could experience a change in your employment status. You never quite know what life is going to throw at you. This is why you should build in some financial padding if you're able. Having an emergency savings account will help you out in a pinch when an unexpected bill appears.
4. Plan for the holidays and other big events all year long.
While the unexpected really can't be planned for, there are some things you can anticipate. This includes the holiday season and other big events like family reunions. There's no reason these things should be a surprise to your finances. For Christmas, set aside as little as $10 or $20 a month and you'll have a built-in gift budget. Same goes for any other big events that you know are arriving. Make room in your budget to save specifically for these if you know you're going to be spending during those months.
5. The easiest budget is saving a set percentage of each check.
If you don't want to have to think too hard about your budget, decide on a set percentage and stick to it. There's a rule that you should save 10 percent of your check for retirement. There is also the popular 50/30/20 rule, which says that you should save 20 percent of your income. Figure out what percentage will work best for your income and stick with it. That money will add up more quickly than you think.
6. If you want more specific saving goals, try the envelope method.
If you're looking for a more specific budget, you can try the envelope method. This method involves you setting specific categories for every area of your life. A basic version would include rent, groceries and entertainment. You can break these down or add as many categories as you like. For each category, you set a specific spending amount you're allowed every month or every pay period. It's usually recommended that you do this budget all in cash, but it can definitely be done digitally or with pre-paid visa cards. This method can be very rigid but will definitely help you stay on track.