Budgeting Tips for the New Year
When thinking about your financial goals in 2022, setting a budget is key. Creating a budget will help you set financial guidelines that will help you to keep track of spending.
Set clear goals, whether it’s paying down your student loans or building up contributions for retirement. Don’t make it overwhelming, rather realistic benchmarks.
Another step to take is to track monthly spending and record your monthly income. Start by writing down your fixed expenses as well as their appropriate time frames (monthly, quarterly, annually, etc.) Include things such as rent/mortgage, cell phone, groceries, and savings. Allocate leftover money to personal expenses but remember to save for emergencies.
Credit card statements can be helpful in examining your purchases. Many cards allow you to review your total annual spending by category. If not, try to do this yourself to make the reviewing process clearer. You can also track your finances digitally using apps like Quicken or use a more traditional method like keeping a spreadsheet.
A simple measurement tip is to use the 50-20-30 budget rule. This method specifies spending 50% of your income on essentials, 20% of your income for savings, and 30% of your income allocated to non-essential, discretionary purchases. Even smarter is 50-30-20, swapping the extra 10% for savings.
If you have any major events expected in the near future, think about planning and saving for the years ahead. Remember, your budget should be adjusted to your changing needs and priorities.
Another helpful tip is to check your net worth once each quarter. Having this information and being able to make comparisons over time is extremely beneficial in taking control of your long-term finances. Also, generating tax reports quarterly or annually allows you to have this information easily accessible for budgetary use and understanding your fuller financial picture.
Most importantly, start small and set realistic goals that make sense for you. If you find yourself struggling to stay on track with your budget, don’t be afraid to ask a financial advisor for help.