Are you making any resolutions for the new year? A resolution is a promise to make yourself start or stop doing something in order to improve your life. Most New Year’s resolutions are made in areas like finances or fitness.
When it comes to financial resolutions, there are so many options. One of the most important financial resolutions you can make is to improve your budgeting skills. You’ll likely need to budget for the rest of your life regardless of what your income or finances look like.
A budget is just a spending plan for your money. It helps you decide how much you’ll spend and on what so you’ll have full control. In order to make the process painless, you need good budgeting habits, which can be developed over time.
Here are four budget resolutions you can make today to start improving your money management skills.
1. Track Your Spending
Before you create or redo your budget, be sure to track your spending so you can include accurate categories and numbers.
You don’t want to budget $300 for groceries for the month when you actually spend $450. Tracking your spending can help you avoid this issue.
Once you create your budget, don’t make the mistake of thinking it has to be set in stone. It’s important to continue tracking your spending on a regular basis so you can update your budget as needed. You can also hold yourself accountable since you will be less likely to overspend if you know you have to track all your numbers.
Set aside time to check your account each day or keep a running log of the cash you spend. Just last week, I realized that someone had hacked into my eBay account and made a purchase for $1,900. Now, since this purchase was so huge, it was easy to realize the money was missing from my account.
However, since I track my expenses and check my account so regularly, I was able to remedy the situation quickly by reporting the issue and contacting the seller before they shipped the item. Had I not been in tune with my finances, I would have been spending money like nothing was wrong and the seller would have probably shipped the item to the hacker.
Then, it would have been more difficult to get a refund and report the situation.
2. Pay Yourself First
If you have specific things you want to do with your money to improve your situation, prioritize them by paying yourself first. This is the easiest budget resolution you can make this year to ensure you meet goals like paying off debt and saving money.
When I first started paying off debt, I wasn’t making a lot of money. I decided to get on a budget and pay myself first. This allowed me to really focus on using each dollar intentionally.
It also eliminated a lot of stress because I didn’t have to worry about having extra money at the end of the month to put towards my goals. Often, I stretched my income and budgeted so carefully that there was never much left at the end of the month.
If I didn’t start paying myself first, it would have taken me twice as long to pay off debt.
3. Make Your Budget Realistic
Your budget is bound to fail if it’s not realistic. Too many people try to budget and realize it’s too hard only because they’re trying to copy someone else’s spending amounts and budgeting style.
Do what’s best for you and use realistic categories and spending amounts. When I first got serious about budgeting, I was obsessed with frugality. I followed people who were being super frugal, and I tried to do it as well.
Then, I cut out important categories from my budget like dining out and entertainment, and it backfired. Sometimes I felt guilty for spending money on things that weren’t a necessity. So, I decided I no longer wanted to live that way. I recreated a budget that was realistic and based on the lifestyle I wanted to live. My budget was still frugal, but it was frugal by my standards, and that’s why it started to work.
4. Specify a Purpose For Side Income
There’s a saying that states money will find somewhere to go if you don’t give it a specific purpose. This is why I don’t understand it when people claim all their financial problems will go away once they start to make more money.
I actually used to be one of those people until I realized that more money doesn’t solve your problems. Given today’s thriving gig economy, so many people are opting to try a side hustle to bring in extra income, and it’s a great idea.
However, one of the best budget resolutions you can make is to specify how you’ll actually use that side income. Work it into your budget and give it a clear purpose. Will you throw all your extra income toward debt? Use it to max out your retirement account? Is it going towards a family vacation? Something else?
The choice is up to you, but if you don’t specify a purpose for side hustle income, the money will find a way to leave your pocket. You don’t want to earn a decent amount of extra money only to find you spent it on Chipotle and impulse buys at Target.
Be strategic with your side hustle income, and you’ll see a much bigger impact on your finances.
Budget Resolutions Will Make Your Financial Life Easier
Budgeting doesn’t have to be a hassle. By making these four budget resolutions, you can actually use your budget to meet important goals and get better results with your finances.
What are your financial resolutions for the new year? Which one is most important to you?