The New Year often brings a host of income changes, fluctuating expenses and saving goals in need of tweaking. As you revise your monthly and long term financial plan, keep the below tips in mind to create a thorough budget that will realistically keep you on track!
Know Your Tax Impact
It’s easy to look at your annual salary and divide it by 12, but that won’t accurately estimate how much bacon you’ll be bringing home. If you’ve elected to have automatic deductions to your 401(k), Health Savings Account, Flexible Spending Account and insurance, you’re impacting how much will be taken out of your taxes. Update your budget by using an online tax calculator to more closely estimate the amount you’ll have left after taxes.
Try the 50/30/20 Budget
There are many different ways to organize a budget – and these methods aren’t a one size fits all. It’s encouraged to experiment with different budget outlines to find the approach that works best for you. If you need a good place to start when deciding what your monthly spending and savings goals should be, try the 50/30/20 Budget. This plan recommends you spend 50% of your income after taxes on necessities, a maximum of 30% on wants and at least 20% towards savings and debt repayment. This will give you a framework to decide which purchases fit which categories, and where your budget may be too stretched.
Plan Ahead for Holiday Spending Sprees
After a holiday season of shopping, travelling and hosting guests, your monthly budget may be feeling a bit strained. Avoid breaking your next holiday budget, and your spending caps for other anticipated expenses like birthdays and annual trips, by planning ahead in your budget. Set up a separate savings goal for your yearly celebrations so you can add to it incrementally each month. Not only will you feel better about planning ahead, you’ll be prepared to pull from your holiday savings without breaking your monthly budget down the line.
Make Life Easier
Stick to your budget while making life easier by setting up automatic transfers and payments wherever possible. Schedule automatic transfers to your personal savings account to continuously grow your nest egg. By making these additions automatic with each paycheck, you’ll never be tempted to spend the money you’re meant to save.
Revisit and Tweak Where Needed
As the year progresses, you’ll have new or updated expenses, a different monthly income and a variety of other changes that will affect your budget. Don’t be shy when it comes to tweaking your budget. Changes are bound to happen and it’s important to reflect those in your monthly financial goals. Staying accurate and organized are the keys to managing a successful budget!
Editor’s Note: Segments of this post were taken from NerdWallet