New Year, New Budget
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Welcome to the new year! That means everyone gets a fresh start. Now is the time to review your annual budget, create or revise financial goals, and get on the path to savings. Are you ready to make 2021 your best year ever?
Budgeting Tips
Aside from the obvious income and expenses, your budget should include specific goals for saving. Perhaps the most important of those should be an emergency fund. I have talked at length about the emergency fund, and how it differs from a normal savings account. If you want to refresh your memory, check out this post. This handy stash of cash is there to cover unexpected setbacks that require immediate action. After the year that we just had, we all know that something unexpected can happen at any time. Aim for $1,000 as a starting point.
“They” say that you should plan to have six months’ worth of living expenses in a normal savings account. For many people, that is a large amount of money! Instead of feeling overwhelmed, I suggest breaking your savings goal into smaller mini-goals. Start with $1,000, then one month of expenses, three months of expenses, and so on until you reach your six-month goal. Seem unattainable? There are things you can do to make saving money easier.
Use the new year as a time to revisit those reoccurring charges. Can you negotiate a better deal on your cable or satellite package? Perhaps, you can cut that altogether in favor of streaming services. Don’t forget to shop your car insurance. If you are still driving less, notify the insurance company. You’ll be surprised at how much you can save on your premium! You might even consider increasing the deductible to achieve a lower rate – assuming you have enough in savings to cover the added cost in the event of an accident.
Often, if you sign up for electronic delivery or automated payments, you can score discounts. Shopping online? If it can’t wait, be sure to look for coupon codes or digital savings before you checkout. Services like Honey can help you automatically save money on your online purchases, or you can opt to upload receipts for rebates through Ibotta or Fetch. If you are shopping in the store, shop smart by buying in bulk, purchase in-season produce, and skip the processed foods in favor of homemade options whenever possible. You can even make your own all-purpose cleaner. Don’t forget to use your rewards credit card like this one to earn points on your purchases – but only if you can pay it off without accruing interest.
Speaking of interest…take advantage of historically low rates! Refinance your home, car, or downsize that credit card debt. Take advantage of balance transfer options when it makes good sense and save on high rate cards. When does it make sense? When you don’t have to pay a Balance Transfer fee, when you can pay off the debt in the allotted time before the standard rate kicks in, or when the standard rate is substantially lower than the other card. Research the snowball method, the debt avalanche method, or the envelope method for debt repayment. Find the one that works for you!
If your debt is paid down, now might be a great time to think about investing. Automated investments can be set up to drop savings into an investment before you even miss it. Getting a raise or a bonus this year? Instead of using the increase, why not invest that instead? That is, of course, assuming you are taking advantage of an employer-matched 401(k) plan.
Looking for even more ways to save?
Time to purge. Clear the clutter to make a profit.
If you find you need to make a purchase instead, you can scour the thrift stores or no-buy groups on social media. Not only is this economically friendly, but it is environmentally friendly, too.
One last note on budgeting. When you are starting to create yours, consider taking a “worst-case scenario” approach. Hear me out – it’s not as defeating as it sounds. If you plan to have higher expenses, but you end up paying less, or if you plan on the same amount or lower income, and end up having more, that means extra money for your savings accounts! For example, if your highest electric bill is $250, plan for that expense each month. If your bill is lower, you have saved money without thinking about it. Make it even easier by splitting your bills up by paycheck. That $250 electric bill means saving $62.50/week in a two-income household. See, I told you it was easy, right?
Need some help with budgeting? Send me an email or contact one of our financial counselors. Don’t forget – eventually, we will all go on vacation again. Start saving now! Don’t forget to leave a comment to tell me what you thought about this post!
Krista Kyte is a personal finance blogger and personal banker with over 18 years of experience in the financial industry. Krista is passionate about helping our members understand their financial situations. She writes tips that will help consumers reach and maintain financial security, and start living the life they’ve always wanted.
