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new year budget

The new year brings a clean slate, a fresh beginning, and an opportunity to start again! And so, January marks the time in which we all resolve to become better in some capacity. We promise to hit the gym more often, to eat more veggies, get more sleep, and finally finish the next great American novel. One of the most common resolutions is to create a budget. So, if you’re like so many who are committed to spending more wisely this 2020 but don’t know where to start, we at Prospect Financial Solutions, in Redlands, California, are here to help! In this article, we’ll discuss how to create (and more importantly) keep your new year budget!

Creating a budget:

  1. Envelope System: Traditionally, this monthly-based budgeting plan assigns cash to physical envelopes. This helped one categorize their money so they could plan to spend only these fixed amounts on each item. However, since this method may sound a bit outdated, more recently, cash and envelopes have been replaced with digital spreadsheets and apps like Goodbudget and Mvelopes. So, how should you implement this plan? First, consider the types of expenses you have and sort them into categories. These can be as broad or specific as you see appropriate. And if you’re wondering, a good place to start is with the 50/30/20 rule: 50% should contribute to your essentials such as rent and groceries, 30% should go to wants, and 20% for savings and debt repayment.
  2. Choose a budget plan. A budget should cover three essentials categories. These include your needs, wants, and, most importantly, savings. Make sure to include money set aside for emergencies and your future. You might consider plans like the envelope system and the zero-based budget to get started.
    • Envelope System: Traditionally, this monthly-based budgeting plan assigns cash to physical envelopes. This helped one categorize their money so they could plan to spend only these fixed amounts on each item. However, since this method may sound a bit outdated, more recently, cash and envelopes have been replaced with digital spreadsheets and apps like Goodbudget and Mvelopes. So, how should you implement this plan? First, consider the types of expenses you have and sort them into categories. These can be as broad or specific as you see appropriate. And if you’re wondering, a good place to start is with the 50/30/20 rule: 50% should contribute to your essentials such as rent and groceries, 30% should go to wants, and 20% for savings and debt repayment.
    • Zero-based budgeting. Another method for budgeting is called the Zero-based budgeting plan. This encourages you to use every penny of your monthly income so that your income minus your expenditures, amounts to zero. Keep in mind, however, that this does not suggest blowing all your cash at the mall. It merely encourages that all of your money should have a purpose. If you spend less in one category, then that excess money should go toward other expenses such as your savings.
  3. Track your progress. Record and keep track of your spending. Online budgeting and savings tools are great resources for remaining mindful of your money. Apps like Mint and Goodbudget are great options, among others.
  4. Automate your bills and savings.Doing so makes it exceptionally easy for the money you’ve assigned to each category to be used appropriately. Automation is particularly helpful for bills so that you never miss a payment while seldom giving them too much thought or effort. You may also consider automated savings to build a savings account or emergency fund with ease.
  5. Revise, edit, and modify your budget. As your income, needs wants, and priorities change, so should your budget and the way that you spend money. While you should always have a budget, adjust and reconsider it as you find necessary.

As we welcome 2020 with resolutions and fad diets, don’t neglect to create or reevaluate your budget this new year. And as you do, make sure that it is done thoughtfully and with the future in mind. So, while your paleo diet or gym habit may or may not dissipate by February (we believe in you though!), prioritize your budget plan this year. And if you require financial assistance, please do not hesitate to reach out to us at Prospect Financial Solutions for your tax service and financial counsel. We are Redlands’ premier accounting firm, and we are prepared to serve you. Reach out today!