The new year may be well underway, but this season is the perfect time to check in with your financial goals. And your budget is a great place to start. No matter how much you earn, chances are that your spending could use some spring cleaning.
Whether you’re devoted to your budgeting app or starting from scratch, we’re here to help you get savvy with your savings. These essential budget tips will help you revamp your finances in 2021.
Update Your List of Expenses
The foundation of any budget is your list of fixed expenses. These are payments that repeat on a monthly basis, such as your mortgage, rent, car insurance, and cell phone bill. Sit down and make a list of the expenses you may monthly and jot down an amount for each.
Remember that life changes, like having a child or adopting a pet, change your fixed expenses. You may have some new bills that you aren’t accounting for. The bottom line is that your fixed expenses are your non-negotiables, so the rest of your budget should work around these costs.
Review Your Spending
Do you know where your money is actually going? You might be surprised. Comparing your fixed expenses to your income shows you how much you have left over for saving and spending, but you could be spending more than you should.
Comb through your credit card and bank statements to get a picture of your spending from the last month. Some common areas of overspending that you could cut down include clothing, restaurants, home decor, and repeat subscriptions. Getting honest about your spending habits can be challenging, but you’ll likely find obvious room for improvement.
Automate Your Savings
“Pay yourself first” is a classic piece of financial advice, and this applies to savings. If you haven’t already automated your savings, now is a great time to do so. Contact your employer to send a certain amount of your paycheck to your savings account each pay period. This will ensure that you always allocate money to savings and eliminates the temptation to spend it.
Set Clear Goals
Your money should always work for you, and setting clear financial goals can help make this happen. To start, consider what your main money goals are for the year. You may want to pay off your credit card debt, purchase a new car, or grow your savings by 10%, to name a few examples.
You can then consider your goals for the not-so-near future. These types of goals may be buying a home within the next few years, saving a certain amount for your child’s education, and retiring by a specific age. Clear goals put purpose behind your budgeting.
Make a Debt Payoff Plan
The average American has $90,460 in debt. This includes debt like student loans, consumer debt, and mortgages. And whether you fall above or below this threshold, you know that any type of debt can be a major barrier to financial freedom. Fortunately, 2021 is a great time to get real about your debt and make a plan to pay it off.
There are a few ways to make a debt payoff plan. If you use a budgeting app, there might be a built-in debt calculator you can use. There are also a number of online debt calculators that will give you an idea of your payment timeline. However, remember that a financial advisor is your best resource for making a personalized (and realistic!) payoff plan.
Plan Ahead for Big Purchases
If you have your eye on a new couch or exciting travel destination, you don’t have to sacrifice these purchases for the sake of your budget. But you do have to plan. Saving for large purchases ahead of time can take the stress out swiping your credit card when the time comes. In the meantime, consider where you can cut back to make this purchase a reality.
Reset After Setbacks
Budgeting setbacks happen. You might have a month where you give in to retail therapy or splurge on an impulsive weekend away. However, these purchases don’t have to derail your budget for the whole year.
When you make an impulse purchase, simply revisit your budget and plan to get back on track. Remember that it’s never too late for a fresh start. You can be more mindful about saving in the days and weeks that follow.
Revamp Your Investments
Investing is often a “set it and forget it” financial strategy. However, it’s wise to take a second look at your investments from time to time. As you boost your budget, make sure your investments are working for you. This could mean reallocating your investments, taking a second look at your target retirement age, and seeking professional advice.
Budgeting requires boundaries, and this can be a challenging part of maintaining healthy spending habits. Nights out with friends, spontaneous shopping sprees, and over-the-top gifting can all be barriers to your budgeting goals. You might also have trouble sticking to a budget if your money values are different than your partner’s.
In 2021, try to set healthy spending boundaries with your loved ones. Simple phrases like “that’s not in my budget right now” or “let’s eat at home instead” can go a long way. While these boundaries will feel uncomfortable at first, it will be second nature in no time.
Consult With a Pro
The reality is that budgeting is often overwhelming. Fortunately, working with a financial advisor can be the budget reset you need. This professional can help you set financial goals, assess your spending habits, maximize your savings, and take tangible steps towards the future. This financial expert can provide personalized budget tips, so you can thrive.
Looking to kickstart your budget in 2021? The team at Second Opinion Partners is here to help. Our financial advisors provide holistic planning and financial education, so you can navigate all of life’s milestones and transitions. Contact us today to schedule an appointment with one of our advisors.