Planning Ahead for 2021: Creating a Budget
Creating a Budget
2020 might go down in history as the year of canceled and changed plans, but it is almost over and 2021 is within sight. Kicking off 2021 with a few simple money management plans is a great way to turn over a new leaf, or build on previous saving successes. This week in our newsletter we’ll be bringing you a series of easy money-management tips to help get your year off to a good start.
Creating a budget for the year can be a great way to get set up for saving success. Many people like to put together monthly budgets, but it’s also an option to make weekly or yearly budgets.
To make a monthly budget, begin by calculating your monthly income. If you have one job and your employer deducts taxes from your paychecks, your monthly income is what is leftover, often called your take-home pay. If you have more than one job, or other sources of money coming in, like dividends from investments or a side-hustle, add these to your monthly income.
After calculating your monthly income, look at your fixed expenses. Fixed expenses are bills you pay each month, like rent, mortgage payments, or loans. It’s easy to keep track of these expenses because, if bills are paid on time, these expenses should stay the same each month.
Next, figure out your variable expenses. These are expenses that change month-to-month. For example, heating and cooling bills might change depending on the time of year. Money spent on gas, groceries, clothes, and other items can also vary. It can be helpful to look back at past bank and credit card statements and calculate what you are spending on variable expenses on average.
Knowledge Is Power
Once you have calculated your income, fixed expenses, and variable expenses, you have a clear picture of your finances. With this knowledge, you can make a plan for how you want to save and spend your money this year.
Setting goals is a great way to stick to a budget. Maybe you’re saving up to buy a home, or for retirement, or for a much-needed vacation. Whatever it is, keeping a goal in mind is helpful for staying on track.
In order to reach these big goals, look at where you might be able to cut down your expenses. For example, cooking at home instead of ordering takeout a few times a month can make a big difference over the course of a year. Additionally, checking your bank statements for subscription services that you may be paying for, but not using anymore, is another good way to trim expenses. A few little changes can go a long way.
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