From exercising more to dropping a bad habit, many of us have the best of intentions with New Year’s resolutions. Unfortunately, an average of 80% of resolutions are forgotten or pushed to the wayside by early February. But with a little planning and goal setting along the way, sticking to a new habit is possible, so why not opt for a fresh start in 2021 with a brand-new budget?
Financial wellness is arguably one of the most important facets of life, impacting everything from our feelings of security to our health (Forbes, 2020). Prioritize Financial wellness and achieve your goals with a clear understanding of your finances, a little math, a concrete maintenance plan and some small adjustments along the way.
Revisit your income
Many Americans had significant income changes within the last year. Whether you were laid off (Wall Street Journal, 2020), started a side hustle or received a raise, you’ll want to start by confirming just how much you’re currently bringing home. Combine all income streams, after accounting for taxes, to get a clear idea of what you’re working with as 2021 unfolds.
Review your expenses
Once you’ve determined your take-home pay, detail any and all monthly expenses. These costs will typically be either fixed or variable (Bankrate, 2020). Fixed expenses, like rent or loan payments, usually stay the same from month to month. Variable expenses, on the other hand, can differ depending on the month. Review and note each expense, whether fixed or variable, over at least the past few months to determine just how much you’ve been spending.
Plan ahead
Once you have an understanding of what exactly is coming in and going out, it’s time to determine your financial goals for the year and adjust your numbers accordingly. Trying to save for a down payment? Perhaps you can cut back on entertainment. Not willing to part ways with your pricier groceries? Maybe a new side hustle is in the cards (Forbes, 2020). Whatever your approach, just make sure the final numbers make sense mathematically and will further your unique financial goals for the year.
Make a maintenance plan
Some people love using budgeting apps (Investopedia, 2020) while others opt for putting cash in separate envelopes (Bankrate, 2020) to keep track of money. Whatever your preference, lay out how exactly you plan to track and maintain your budget over the course of the year. Set up your spreadsheet, pay the app subscription or ensure you have plenty of envelopes on hand. Preparation is key to creating habits and maintaining consistency when it comes to your budget.
Adjust as needed
Budgets are built to be amended. While your income and expenses may fluctuate over the course of the year, that doesn’t mean you have to tear your budget down to the studs. By developing a clear, thoughtful understanding of your income and expenses, you’ll be better prepared to change, adapt and ultimately, potentially achieve your financial goals (Investopedia, 2020) in 2021.
As a brand-new year unfolds, prioritize financial wellness with a new budget. Whether you’re recovering from a furlough or hoping to become a homeowner, your budget is one of the most powerful tools at your disposal when it comes to achieving your goals. With a thorough understanding of your income and expenses, a solid maintenance plan and the ability to adjust as you go, you’re on your way to becoming a budgeting pro by this time next year.
Published on January 4, 2021
