How to Make a Budget for the New Year

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Want to feel good about your finances in 2020?

You need to make a budget.

And not just any budget – one that actually works.

Follow these 3 simple steps to take control of your money and enjoy the financial freedom you’ve been craving in the new year.

Step #1: Determine Your Take Home vs Your Set Monthly Expenses

Budgets are easiest to work with when they’re done one month at a time.

Figuring Your Monthly Take-Home Pay

For your new year’s budget, start with the amount of “cash” you take home each payday, and find the total for the month.

For instance, if you’re paid weekly, multiply the take-home pay from one of your paychecks by 4 to determine how much your monthly post-tax income is.

Subtracting Your Set Monthly Expenses

Once you have your monthly post-tax income figured out, it’s time to subtract all your set monthly expenses from your total.

Set expenses are things that you pay every month. This includes bills like:

  • House or rent payment
  • Car or personal loans
  • Internet and phone bills
  • Monthly subscription services like Netflix
  • Utility bills

For bills that aren’t the same amount every month – like your water or electric bill – round them up for budgeting. For example, if your water bill is around $47 each month, round it up to $50 to account for months when it may be a bit more.

Step #2: Set a Monthly Spending Limit for Your Variables and Subtract it from Your Remaining Monthly Amount

Now that you know how much money you have left over each month after your regular monthly bills, it’s time to figure in the remaining details like gas, groceries, and entertainment.

Most budgets don’t succeed because they don’t have limits put in place on variables. Thus, people tend to overspend in these areas, leaving not enough money at the end of the month for other necessities or desires.

When creating limits for your variables, it’s best to estimate as closely as you can. For gas, factor in how much you’ll need to get to and from work each week, and then add in an extra tank or more so you aren’t limited to just home and work.

Did you find you have more money going out each month than you have coming in? Here are some tips for reducing your spending even further:

Save on your food spending by cooking at home instead of eating out. Call your cable TV provider and see what they can do to lower your bill or cut the cord altogether and make the switch to providers like Hulu or Netflix. How about renting movies and staying in rather than going to the movies for date night?

Step #3: Make Your Budget

Now that all that math is finally done, you can breathe a sigh of relief!

Based on the numbers you’ve figured above, you can now make your budget.

For your monthly variable spending limits, try out Dave Ramsey’s Envelope System. It’s a great tool for keeping you on track and on budget each and every month.

Have money left over after your expenses? That’s great!

Use it to create more financial freedom for yourself.

If you’re currently paying on loans, put half of what you have leftover into savings every month, no matter how small the amount. It all adds up over time!

With the other half of your remaining funds, make an additional payment on your loan with the highest interest rate (excluding your mortgage – save that for your very last loan to pay off). Just make sure to apply your extra payment towards the principal balance – not interest!

And if you don’t have any loans left to pay off, put it all into savings! The more you save now, the better off you’ll be down the road.

CFSC Provides Easy and Convenient Ways to Help You Stay on Budget in the New Year

Using a prepaid debit card from CFSC Community Financial Service Centers can also help you easily manage your funds without adding unbearable interest rates and debt that you acquire with credit cards.

Find a CFSC near me today.