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Creating a New Year’s Budget You Can Stick To

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The New Year is a time of fresh resolutions and, more often than not, a bit of extra financial pressure with the unpaid bills of the holiday season still lingering in the background. But it’s also a good time to put together a new, more effective budget for the year. With that in mind, we thought we’d provide you with a few tips on how to create a New Year’s budget you can actually stick to.

Before you actually launch into the details and execution of your new budget, it’s worth taking time to review the previous year. Even if you did not have a budget to guide your finances, simply reflecting on last year in order to see if any patterns or identifiable habits emerge. Noting these now could help with the rest of the planning process.

Here are some general questions to ask yourself while reviewing the previous year:

         – Do you believe you made any financial mistakes in the previous year?

         – What about good choices; does anything stand out?

         – Are there any regrets regarding how you handled your money last year?

         – Are you impressed with any positive habits or good decisions you made last year?

This is also a good opportunity to reflect on any surprises that caught you financially off guard. This could be car repairs, medical expenses or anything else that came out of nowhere and stung you in the pocketbook.

Try to estimate how much these surprise expenses ended up costing you and make note of that as well. For the next year, you’ll have an idea of what to expect on fronts like this, which means you won’t be taken by surprise. Ideally, you’ll even have some money set aside to deal with it.

Draw up Loose Financial Plans for the New Year

Just because you can’t predict every single thing that’s going to happen in the New Year doesn’t mean you can’t start preparing for the major events and expenditures. Indeed, that more or less sums up the purpose of a budget – to prepare for a financial future based on predictions and best guesses of what is going to occur.

Think about any upcoming events, activities or major life changes that are likely to have an effect on your budget. Here’s a quick list of expenses beyond the obvious – your rent – to give you an idea of what to plan for:

            – Mortgage or car payments

            – Down payments on new purchases (such as on a car)

            – Tuition payments

            – Routine medical and dental bills

Routine car maintenance (such as mandated safety checks)

There are certain expenses throughout the year that you know are going to arise at a specific time. Mapping these out ahead of time gives you a chance to start putting that money aside ahead of time so that it doesn’t apply any extra pressure when the bills are actually due.

Prepare Your New Year’s Budget

Once you’ve taken time to prepare and reflect on the previous year, you’re ready to get started on creating a new budget. Everyone has their own approach to budgeting, and we’re not using this space to recommend one form over another. Instead, we’ll just reiterate the point that a budget is only going to be successful when your expenditures are less than (or, at bare minimum, equal to) your income. If this is not the case, that means it’s time to either look for an additional income stream or else cut a few unnecessary expenses from the outlook.

You can also read here and here for some previous budgeting tips we’ve posted on the blog.

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How to Stick with Your New Year’s Budget

As most of us can attest, New Year’s resolutions are easy to make and almost impossible to stick to – at least that’s the way it feels. And to be fair, the statistics back this feeling up. Research conducted at the University of Scranton found that only 8 per cent of people actually achieve their New Year’s resolutions.

That’s a fairly dismal figure, and it could easily leave you wondering what point there is in trying. However, with a realistic budget, a few well-crafted strategies and strong sense of determination, your New Year’s budget resolution stands a much better chance of lasting the year.

For the remainder of this post, we’ll offer a few tips on how you can make that happen:

Set simple, realistic goals.
It’s easy to get carried away when crafting a new budget, imagining that, with enough nips and tucks, you might actually be able to afford that new, nicer flat or holiday in Australia that you’ve been dreaming about. Lofty goals would be great if they inspired more aspirational behaviour, but the reality is that they’re more likely to cause you to abandon your budget altogether once you realise that it just isn’t realistic.

Automate your savings contributions.
Savings are an important part of budgeting, as they provide upward mobility and can bail you out of a surprise financial setback. Set it up so that this money is dispatched as soon as your pay cheque clears, as this reduces the temptation to save a little bit less this month.

Enlist some technological help.
There are several financial tools and apps out there to help you with the finer points of budgeting. One of the most popular examples in the UK is Money Dashboard, a personal finance manager app that helps you save money, make better financial decisions and budget more effectively.

Have a backup plan.
One of the most common reasons that we end up breaking our New Year’s resolutions – including a new budget – is because we end up slipping up. Psychologically, it’s easy to justify quitting altogether once you’ve missed the mark. With a budget, a financial emergency can also throw a spanner in the works. With that in mind, it’s important to have a backup plan, such as a payday loan service to fall back on should the need occur.

Remember that a small short term loan could actually help you hold the budget together in a crisis, so a surprise expense along the way doesn’t have to mean the budget is broken. 

About the author

Peter Davis Peter Davis is a Marketing Analyst at PaydayLoan123 specialising in financial products. Peter writes most of our articles as he stays up to date with the latest information. He enjoys most sports, particularly playing football and watching his favourite football team. Peter really like his food too as we have all witnessed first hand!

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