2020. Whew! It goes without saying that this year falls into a category all on its own, with so many of us being affected in unimaginable ways. However, while 2020 brought challenges of many different types, a new year with a fresh start is fast approaching (and we couldn’t be more relieved). With that said, after the New Year’s celebrations conclude, many people will be thinking about the same thing – money, and how to manage it better.
So, instead of counting the days ‘til we bid farewell to 2020, let’s be proactive and plan for a better year ahead. After all, one of the many things that we’ve been reminded of this year is the importance of being financially prepared!
That’s precisely why I’ve partnered with You Need A Budget, a personal budgeting program, to share four important tips for how to get your finances in order in new year– regardless of how much money you have in the bank.
4 Major Tips for Starting a Budget for the Upcoming Year
1. Review the Past Year
This is one of the best places to start. Set some time aside to go through your statements and understand every little thing you spent your money on, be it coffee, groceries, online shopping, travel, or entertainment. Group your spending by category and either write it down in a notebook or type it into a spreadsheet.
Seeing your year laid out in this way will allow you to compare your income to your expenses, which in turn will allow you to see how much money (if any) you have left after your normal spending. This practice is important in order to discern which adjustments you need to make to either increase savings or allocate elsewhere.
When looking back at your annual spending, evaluate and ask yourself: what could you have done better? What do you think you did well? Could you have been better prepared for anything? Being both honest and a little self-critical here should help to give you an idea of how you can improve. Hopefully this will motivate you to be even more mindful of your saving and spending in the new year!
2. Plan for the Year Ahead
Planning for the year ahead will create an opportunity for you to get ahead of your finances so that you’re prepared even before bills are due. Though there’s always the chance that unexpected expenses arise, there are others that you can foresee well ahead of time.
Are there any big expenses you know you’ll need to save for? A new car? Home improvements? An exciting vacation? Whatever they may be, there’s no reason to leave saving for them until the last minute.
Planning ahead will help you to avoid unnecessary stress that may arise from any rushed transactions and compel you to think about the bigger picture when debating those tempting impulse purchases!
3. Create an Emergency Fund
Setting up an emergency fund at the beginning of a new year is always a great idea and doesn’t have to be complicated. Regardless of whether you consider your employment stable or precarious, you can still benefit from setting money aside for unpredictable emergencies.
This year has made it clear that any and everything can change in the workforce at the drop of a dime (money pun intended). Thus, it’s important to be prepared so that you can navigate any precipitous changes in your income. Plan to put aside a certain amount every month and resist any temptation to dip into it: you’d be surprised how even a small amount adds up over a year if you let it!
4. Write Down Your Goals
Without a plan for your finances, it becomes quite challenging to be successful at saving. An imperative part of budgeting is not only setting goals for your funds, but actually writing them down.
It’s helpful to have both short-term and long-term goals, since some things are easier to achieve in the near future and others inevitably take time. In either case, write your financial objectives on a piece of paper (or record them digitally in a spreadsheet) and keep them somewhere you’ll be able to see them often – this will keep you focused and accountable.
Depending on how you like to see your money, it can also be very helpful to open different savings accounts for your various goals. This will allow you to see the amount of money going towards each goal, making it easier for you to keep track of your progress.
Why YNAB Can Help You Achieve Your Budgeting Goals in the New Year
While the above tips will assist you in kickstarting your budgeting journey, there are additional tools that will make it easier to stick to your plan and achieve your goals. You Need a Budget (YNAB) is my personal favorite tool and I recommend it to anyone looking to take better control of their money.
Although I’m good at managing my own finances (not to toot my own horn, haha), since adopting YNAB into my budgeting routine, I’m able to get a clearer, more detailed understanding of my money. Not only that, but I have so much more control of where, why, and how I allocate my finances (and you can never have too much of that!)
Simply put, YNAB is an award-winning personal finance software that teaches you how to gain total control of your money. One of the things I love is that users can acquire so much valuable knowledge through live workshops, video trainings, and a proven method, all for free! Another thing I love about YNAB is that the interface is extremely simple, which makes it enjoyable to use. I was able to sign up in about 10 minutes before entering my account information and expenses to create a savings plan. For those new to the software, YNAB offers a 34-day trial for FREE, no credit card required by clicking here.
Whether you think you’re a seasoned budgeter or you’re new on the scene, you will undoubtedly find value in YNAB’s four simple rules that show you how to stop living paycheck-to-paycheck, get out of debt, and save more money so that you can spend it on the things that matter most to you. Their four rules are:
- Give Every Dollar a Job. Know exactly how you want to spend the money you have available – and only the money you have right now – before you spend a dime. This helps ensure that you have money for the things that matter most to you!
- Embrace Your True Expenses. Figure out what you really spend and treat those infrequent expenses (like the holidays, twice-a-year car insurance or replacing your laptop every two years) like monthly expenses in your monthly budget. Breaking big or uncommon expenses down means you won’t be surprised by them.
- Roll With the Punches. Accept that things change and your budget needs to be flexible (especially in a year like this one, whew!) You won’t spend the same amount on all categories every month, so be prepared to move money around. Moving money around doesn’t mean you are budgeting wrong, it means you are actually budgeting!
- Age Your Money. Break the paycheck-to-paycheck cycle by working towards using the money you earned last month to pay this month’s expenses. This margin will create more peace of mind than you can even imagine.
These Four Rules are different from anything you may have tried before because they teach you how to prioritize and plan for whatever your financial goals are.
With all that said, what are you waiting for? Sign up for YNAB today and tell them I sent you… 😉 No matter what your financial goals are for the new year, You Need A Budget can assist you by allowing you to prioritize, plan, and most importantly, save! YNAB’s method will help to demystify the idea of budgeting by treating it as something you do every day. So, in 2021, give yourself the gift of financial health, and get on the path towards realizing your financial goals.
This post has been written in collaboration with You Need A Budget, but all opinions are my own.