How to Create Your New Year’s Budget — And Stick to It
So, your New Year’s Resolution is to finally create a budget — and stick to it. Whether your goal is to take a family vacation, pay off debt, buy a home, save for retirement, or something else, a budget can help you reach it. But it’s one thing to say you’re going to finally create that budget you know you’ve always needed, and quite another to actually sit down and crunch the numbers. Of course, your new budget is the easy part. Sticking to it over the long term is harder.
Sticking to a budget takes discipline and sacrifice, but while it’s hard, it’s far from impossible. One trick to creating a budget is to be realistic about your expenses. Another is to take a hard look at your spending habits and focus on eliminating those expenses that aren’t adding anything of value to your life. Finally, you — and your spouse or partner, if you have one — need to revisit your budget regularly and reassess your spending habits and needs.
You’re never going to be able to stick to a budget that doesn’t allow you to meet your actual financial needs. Before you create your new budget, get an accurate picture of your needs by tracking your spending for two to three months. If you’re one of those people who no longer carries cash, you can streamline this part of the process by taking a look at your bank and credit card statements for the past few months. Figure out what your expenses are and try to get a realistic picture of how much you need to cover them.
When you make your budget, use those realistic figures. You’ll need a certain amount for housing, utilities, gas, car repairs, and other essentials. By using realistic figures that reflect your real spending habits, you’ll be able to budget enough so that you’ll feel like your needs are met within the constraints of your budget. Don’t try to cut back on essential expenditures; we’re going to take a look at tightening the belt in step two.
Eliminate Unnecessary Expenses
Now that you know where your money is going, it’s time to eliminate unnecessary expenses. Unnecessary expenses can be things you didn’t realize you were spending so much money on — maybe you weren’t really aware that your daily morning coffees were costing you almost $100 a month, for example, but now that you know, you’re going to save by making the switch to home-brewed java.
Unnecessary expenses can also be things that you’re spending money on but that don’t really bring you any happiness or add anything of value to your life. For example, maybe you’re paying a monthly cable bill and not really watching TV. Maybe you’re paying for a Kindle Unlimited subscription but you never have time to read. Or maybe you can find ways to watch TV and read books without spending so much, like buying a Netflix subscription or asking your local librarian to show you how to check out e-books for your Kindle.
The important thing to remember when you’re cutting the fat out of your budget is that you must still allow yourself to spend some money on the things that bring you happiness. Sure, paying off debt and working toward financial goals are important, but you’ll never be able to stick with your budget if doing so consistently deprives you of all those things which give your life meaning. So go ahead and leave some room in the budget for a new coloring book, some knitting wool, a night out with your friends or a movie ticket.
Tweak Your New Budget Regularly
In order to stick to your budget, you’ll need to revisit it regularly. Sit down with your budget each month and compare it to your actual spending. If you have a spouse or partner, have them sit down with you to go over the numbers and make adjustments, if necessary. You may find that you need more room in your budget. Or you may find that you have come in under budget and have more money than expected to devote to your financial goals. Don’t forget to treat yourself each time you reach a goal; your discipline deserves to be rewarded.
2016 can be the year you finally learn to stick to a budget. Just make sure you’re being realistic and still allowing yourself to have some fun money to spend on the things you enjoy. With discipline and the right attitude, sticking to a budget will soon become second nature.
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