8 Budget Tips To Start Your New Year Right
The new year brings with it the opportunity to start fresh in every aspect of your life. This is especially true when it comes to getting on track with your finances.
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One of the best places to start is with your budget. You might find your existing budget has a few outdated goals in it, could use a new method for tracking your overall finances, or there’s some extra financial wiggle room in which you can focus on creating an emergency fund. Whatever the case may be for you, start the new year off right with the help of these budgeting tips.
Review Your Financial Goals
Many people start the new year off with resolutions. Take a moment to figure out what your financial resolutions and overall goals are in 2023.
What do you specifically want to do with your money this year? For example, let’s say your financial goal next year is to max out your traditional IRA or Roth IRA. According to the IRS, the total contributions you would be able to make to a traditional IRA or Roth IRA cannot be more than $6,500 if you’re under age 50 or $7,000 if you’re age 50 or older. Once you decide your financial goal is to max out this account, you can begin estimating how much you need to set aside each month in order to reach this goal.
As you start making specific financial goals for the new year, take note of any outdated goals or ones you might have already achieved. Avoid setting any goals that are no longer relevant to you. Consider any recent life changes, such as receiving a raise, that may influence the types of goals you set next year.
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Review Your Expenses
In a budget, your expenses break down into three categories. There are fixed expenses, which typically stay the same each month, variable expenses, which change month to month, and periodic expenses, which only happen once or a few times each year.
Starting your new year off right means having a clear understanding of each expense so you can properly allocate your income to pay for it. It also allows you to better understand your spending habits. Take a moment to review your grocery receipts, for example. Admittedly, this is a variable expense few Americans had much control over in a year of soaring inflation prices. With some careful review, however, you might find there are places where you can save.
Reconsider Subscriptions
As you’re reviewing your expenses, pay close attention to any recurring subscriptions. Which streaming services do you use versus those you don’t? Is there a newspaper you subscribe to that you don’t actively read? Do you pay for several subscription boxes?
Jot down any subscriptions you’re not actively using and cancel them to save some extra money. If you don’t want to cancel a service but don’t enjoy its current price tag, consider switching to a less expensive plan with ads.
Take Action To Pay Off Any Debt
As you save to meet your financial goals, it’s critical you make a plan to get out of any form of debt. This could range from having student loans to maxed out credit cards. Review financing options that may be available to you, such as refinancing or consolidation.
If there aren’t those options available, consider paying off debt through the debt snowball or avalanche method. Those unsure of which method is best for their financial situation or unclear about how to get started paying off debt may seek guidance from a certified financial advisor or a credit counselor.
Check In on Your Emergency Fund
How does your emergency fund look right now? If you used a portion of it to pay for an urgent expense last year, make it one of your top priorities to replenish the fund this year. You should also consider actively contributing to this fund throughout the year. The more you can set aside into your emergency fund, the more you’ll be able to protect yourself with a financial safety net.
Keep Building Your Savings
Continue to keep setting aside a percentage of your income toward your savings. The general rule of thumb is saving 10% from each paycheck and gradually a little more once you feel comfortable doing so.
When possible, arrange for an automatic withdrawal from your checking account to a savings account. Automating keeps you from questioning whether you should put some money into savings because it is already there.
Reevaluate Your Budget Tracking Tool
You might be a few years into budgeting and ready to reevaluate the types of tracking tools you use to budget. If you feel like an app has not been helpful, consider switching over to a designated notebook or an Excel spreadsheet. If you want to simplify the overall budgeting process, consider using a budgeting app.
Pay Attention to Your Budget Year-Round
Life happens! While 2023 could be the year you meet your financial goals, it could also be the year where unexpected challenges uproot some of these plans.
If you need to postpone a financial goal or set a new one to reach quickly, give yourself enough flexibility in your budget to ensure you’re able to make these changes.
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This article originally appeared on GOBankingRates.com: 8 Budget Tips To Start Your New Year Right
