From
getting into shape, to eating better and other self-help goals, there is no
shortage of resolutions that people make each year–and that includes saving
money. Despite the best intentions, most resolutions are abandoned and
forgotten by the time February rolls around, largely because people don’t take
steps to ensure they can reach their goals. If saving money and reducing debt
are part of your goals for 2020, now is the time to create your budget for the
year.
As unpleasant as budgeting may be,
without one you are setting yourself up for failure, particularly if you have
plans for significant purchases. If done realistically, a budget is a road map for
where you stand financially–from what you earn, to where your money goes and
what you can afford to spend. Here are some things to keep in mind when planning
an effective budget:
The first thing is
where your money is already going–from mortgage payments and utility bills, to
groceries, gym memberships and the day-to-day purchases during the average
month. Tracking your spending is important because it allows you to identify
where money may be wasted or where it can be used more effectively, especially if
you need to reduce debt.
Once you have
documented your routine expenses, take the time to see if there is anything you
can get rid of or cut back on without negatively impacting your quality of
life. Just remember that if you aren’t realistic about the changes you make,
you will probably be setting yourself up for failure.
Outline major
expenses you expect in the year ahead so that you are aware of how much you
will need to save each month.
Identify savings
goals and make sure to regularly keep track of your progress so that you will
know far enough in advance if you need to make other financial changes or
eliminate other expenses to meet those goals.
Consider using an
app to track your spending and keep it in check – taking advantage of the
warning features that will notify you when you have overspent or when your
account balance may be too low.
Automate as many
routine payments as possible, so that these payments come right out of your
paycheck the moment you get paid, including deposits into your savings account
or retirement savings plans. Money that never makes it into your account, or
which is pulled out almost immediately, won’t be wasted on unnecessary
expenses.
Make sure to
routinely check the balance on your credit cards at any given point in the
month, as it is easy to run up higher balances than you realize. This also
makes it easier to spot credit card fraud more quickly.
