Budgeting for the New Year can be overwhelming, especially if you do not have a budget from the previous year to go off of. Check out these tips for putting together your budget for the New Year:
Break it Down Month by Month
Different months bring different expenses, such as summer vacations or the holidays. Plus, it is easier to track monthly expenses rather than yearly expenses.
Budget Every Penny
If you want to truly stick to a budget, you need to track your funds down to the penny. If you leave yourself with extra cash, it will likely get spent when it could have been saved.
If you don’t already have an emergency fund, now is the time to plan an amount that you will set aside each month to create one. Life is unexpected and having a financial plan can make difficult situations less stressful.
As you enter the new year, make sure you have taken advantage of the benefits offered by your employer if applicable. Then think about any regular medical expenses, such as prescriptions, copays for regular appointments, glasses and contacts, dentist appointments, etc. Also factor in the possibility of a convenient care appointment here and there. Large, unexpected medical expenses should be considered in your emergency fund. However, if you know that you will need a procedure in the upcoming year, factor it into your medical budget.
Set goals for your savings. Think about where you want to be this time next year and determine how much you will need to save each month in order to get there. Keep it realistic, but save as much as you can.
Budget for your regular bills such as your mortgage/rent, utilities, vehicle payments, cell phones, daycare, insurance, etc. These are unavoidable and must be paid each month.
Do you have credit card debt? What about student loans? Determine how much you have to pay on these each month and then look at how much you can add to your monthly payment in order to pay off the debt faster.
This should include groceries, dining out, toiletries, cleaning supplies, etc. If you feel like you spent too much in this area previously, consider dining out less and planning your groceries better so that you can use leftovers for the next day’s meal.
This includes gasoline, oil changes and other maintenance, public transportation, parking, registration, etc.
Give yourself a set amount that you can spend on clothing each month. If you know that you are going to need a winter coat this year, take it into consideration when planning your budget. If you have children, think about the clothing that they might need throughout the year, such as new gym shoes in August.
Are you planning to buy a car or a house this year? These large purchases do not happen every month and are usually planned in advance. If you are thinking about making a large purchase in the near future, start budgeting for a down payment.
Think about the activities/sports/trips that your child might have in the upcoming year. If you know they are interested in playing football, budget for new cleats or other gear that they might need.
These expenses happen every year, and they are the same time each year, so it is easier to plan for them. How much will you spend on birthday and holiday gifts this year? Will you have to travel to see family or prepare food for a large group? Budgeting for these purchases now will make the holidays much less stressful financially.
If you are wanting to take a vacation this year, make sure to include this in your budget. Even better, open a vacation savings account if you haven’t already. That way you can deposit a certain amount into the account each month that can be used for your trip.
These expenses are important, but should be towards the bottom of your list. Include cable, tv/movie streaming services, movies, concerts, and sporting events in this section of your budget.
Budget for any donations you make each year, such as charities or other causes. Include community/school fundraisers in this section of your budget as well.
It is easy to spend money, but creating and following a budget can help keep you on track. Not sure how to get started? Through our partnership with University of Illinois Extension Money Mentors, we offer free financial education and confidential financial counseling to help you achieve your goals. Learn more about this program here.