3 Things to do Before Making a Budget for the New Year

One of my favorite things is opening up a brand new yearly planner. All the pages of dates with nothing scribbled on them cause me to wonder about the coming year. What will it hold?

This love for planning spreads over into my finances. If I don’t set a specific plan for my money and diligently take steps to make progress towards my goals, there never seems to be enough extra cash around at the end of the month.

With careful planning though, managing your money will become much easier and you have the funds to spend on fun, as well as your basic necessities.
In fact, managing your money has more to do with changing your behavior than it does with following super strict no-spend rules (a.k.a budget).

I hated doing a budget, but had to learn that a budget is simply a plan for your money. There is no judgment, only helpful guidelines to show you how to achieve your financial goals.

Here are three tips to help you start the new year off on the right foot with a plan for your money.

3 Things to do Before Making a Budget for the New Year

#1. Review last year 

Take some time – it doesn’t have to be much – to think about how your finances went last year and what you can do differently this coming year. Here’s a worksheet which will help you jot everything down.

• Did you make any financial mistakes last year? 
• How do you wish you had handled your money?
• What were some of the good choices you made?
• What were some of the smart ways you were careful with money? 

Were there any surprise events which ended up being super expensive?

Are there some expenses which came up, which could have been planned for in order to have the money ahead of time?

A personal example, last year was the year of never ending, expensive car repairs. So this year, I increased the amount of money to put aside for car repairs each month and have even managed to build up some savings earmarked for repairs.

While you are reviewing the year, now is also a great time to see how far you have come and to pat yourself on the back.

How much debt were you able to pay off? Were you able to build your savings?

Seeing the progress you have made will help keep you motivated to continue striving towards your goal, especially if the end is a long ways off.

I love saving money in preparation ahead of time, as it has made such a difference in my incentive to save and desire to work extra to more quickly reach my goals.

Taking some time to review both the good and the bad ways you handled money in the past year will help you avoid making the same mistakes as well as help you to continue the positive habits into the future.

#2. Plan for the coming year

I know we can’t predict everything, but if you have an idea of what might happen next year, you can start preparing for those expenses now.

You can never go wrong with saving money in preparation ahead of time! If that particular event doesn’t use the money, there will be plenty of other volunteers to spend your monies.

Do you have certain events in the coming year which will put a strain on the wallet? Put aside a little money each month so you don’t have to scramble at the last minute.

Take what you learned from reviewing this past year and apply it to the future. If there were bills which caught you off guard because you forgot to plan for them, just add a line item in your monthly budget to save up the cash for next time it comes due.

Along with remembering previous lessons, ask questions about what you would like your finances to look like.

• Are you happy with where your finances are now?
• What would you like to change? 
• Do you want to pay off your debt? Build an emergency fund? Travel?

Now is the time to dream a little, so you can find a reason strong enough to stick to your financial plan long past the short life of a New Year’s resolution. Your dream will be your motivation which will give you hope and keep you going in the drudgery of daily life.

#3. Focus on one thing

When all of your goals are twisted together and you are trying to do all of them at once, your progress will be dismal. Instead, pick one of your dreams and focus your efforts on obtaining it.

You will have so much power in your single focus, you will be amazed at how quickly you are able to cross this task off as completed.

I have learned this lesson of focus the hard way, as I have tried to save for tuition expenses, build up emergency savings, save for a new car, and stash away money to be able to move, all simultaneously.

Every time a tuition payment comes due and there is not quite enough cash to cover it, all the other funds are drained. This cycle is frustrating, but I have come to accept the need to prioritize and focus only on one financial goal at a time, which is school for now.

Now that you have prioritized your one objective, how are you going to get there? 

You may need to trim expenses or boost your income. Every extra dollar outside your regular expenses should be designated towards the targeted priority.

Instead of making a New Year’s resolution to ‘just do better with money,’ try analyzing your current money habits and select one specific goal to accomplish in the coming year.

You can absolutely change your financial situation this year, by following a written plan for your money, trimming unnecessary expenses, increasing your income, and focusing on one dream at a time.

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