New Year, New Budget
As we say goodbye to 2017, it is time to reflect and set goals for the new year. A new year brings new opportunities and a fresh start to your life as well as your budget. Like some, you may have overspent on gifts for the holidays. Creating your 2018 budget now and setting realistic goals for yourself will help you get back on track. Below are some tips to keep in mind when you set your budget for the new year.
Income and Expenses. To create and maintain a proper budget, you must know the inflows and outflows of your money. To get a better grasp on these, start tracking all money that comes in and goes out of your bank account in a one-month period. Once you have an idea of what your monthly income and expense are you can start yearly budgeting and set savings goals.
Overspent in 2017? Did you over spend in 2017? Maybe you spent a little more than expected on Christmas gifts and were shocked to see your balance on the credit card bill? Use this as a learning curve for next year by calculating the total amount you spent on gifts this year. Once you know how much to expect to spend next Christmas, you can work that total number into your budget this new year.
Plan for Your Future. What types of things are you saving for? A vacation? House projects? Do your research and figure out how much you need to save. Once you have that rough estimate you will know how much to put away each paycheck. Talk with your employer, they may let you set up an automatic deposit into a secondary bank account. This would help to guarantee that you are always putting money away for savings!
Pay Yourself First. Although it is important to set aside money for a house project or vacation, it is equally important to save for yourself. The “pay yourself first” phrase refers to the practice of setting aside money for your retirement. A lot of times, employers offer this benefit as an automatic payment before the money even reaches your wallet. This money comes out of your take home pay, so be sure to take note of that when you are calculating your income based on your salary.
“Fun” Money. Whether you like to eat out or take your family to the movies, it is important to keep those types of things in mind when creating your budget. Closely monitoring how much money you have left in a month that you are able to spend on the fun activities will help you know exactly how many times you can afford to do them. For example, some months you may be able to eat out once a week, while others you may not be able to do these activities at all. Stay on track with your budget by staying disciplined and only allowing yourself to do what you can afford.
Remember that a budget is simply a guideline or estimate, but to create and maintain a healthy budget you should always try and stick closely to it. If you spend more in one area than expected, try and see where you can pull from another. To learn more about money management or DIFS visit our website at www.michigan.gov/difs.