If you’re anything like me you’ve been looking over your budget and making plans to have an awesome year financially.
Since several of my goals for the year are personal finance related I figure now is the perfect time to revamp my budget and see what needs changed.
Here are the steps I’ve taken to breathe new life into an old budget.
Find a Good Budget Template
I’ve always preferred paper and pen for almost everything I do. Budgets, to-do lists, grocery lists – I always use paper and pen. So, this year I decided I’d give budget spreadsheets a fighting chance.
One of the problems I have with keeping my budget on paper is that often it gets sloppy. I have to cross things off my budget or scribble and rewrite them. With a spreadsheet I can simply enter in my numbers and they’ll be automatically calculated. Plus changing numbers is super simple.
I chose a budget template from excel and it works great. It’s a monthly budget with a projected column and an actual column. I went ahead and filled in the projected column for the month of January.
If you don’t like the templates that come with excel there are dozens of free templates out there. And, if you’d rather have a program do the legwork for you, you can sign up with a free service like Personal Capital that pulls information from your bank and credit card accounts.
Review Your Expenses
Upon reviewing my expenses I didn’t find a bunch of items that I could lower. What I did realize, however, is that I have a couple credit cards with balances that need paid off.
Apparently I used the credit card linked to my Amazon account while Christmas shopping more than I had realized. I went ahead and plugged the full balances into my projected budget for January with full intentions of paying them off.
I set realistic balances for every other budget item, but I’m hoping that I can beat them for the month of January.
Some budget categories you may want to look into lowering are TV, food, miscellaneous spending, etc. Everyone’s budget looks different so you might find you need to lower expenses in different categories.
Make a Plan
With my budget I am simply going month by month. If I can successfully pay off my credit card balances this month then I can start saving my extra cash for saving goals beginning February.
So this month will be full of sacrifice and very low expense living. By wiping out the bit of credit card debt I’ve accumulated I’ll be able to focus on the important goals the rest of the year.
Your budget plan might be different. If you need to pay off debt make a spot in your budget where you can allocate extra money toward your goal. If you are saving for an emergency fund, down payment on a home, or investing account do the same. Keep your goals in mind each month as you review your budget.
Another option you have to meet your financial goals after budgeting for all normal household costs is to save percentages. This works great if you want to simultaneously save for different financial goals. For example, if you want to start investing in the stock market, save for a new car, and purchase a rental property all in one year you can.
Just break down your goals in order of importance and urgency and put a percentage by them. You could save 20 percent of your extra income for stock market investing, 30 percent for buying a new car, and another 50 percent for a rental property. This way you can make progress on all of your goals.
Go Back to Your Budget Often
I always stay motivated to stick to my budget when I review it often. I would suggest visiting it at least once a week to make sure you are staying on target.
Then as your needs and expenses change make those changes to your budget each and every month. It’s very unlikely that your expenses won’t change from month to month.
For example, if you have debt and pay off one bill you need to reallocate that money. If you lower your grocery budget you need to put those savings somewhere else.
Stay On Top of It
Not everyone needs a written budget. There are some people who are disciplined enough to stay on budget without trying too hard. However, if you’re like me and aren’t naturally a frugal person it’s better to be safe than sorry.
Having a working budget can help you achieve your financial goals this year and for years to come. The more you practice budgeting the better you will get and the bigger rewards you’ll receive.