With the upcoming holiday season of course being a really busy time of year, it becomes even more important to consider setting aside some time to think about your finances. While budgeting is a valuable method of keeping on track all year around, prior to the close of the current calendar year, it is also a good idea to re-evaluate your budget and get it ship-shape for the New Year.
If you truly want to get off to a good financial start in 2017, here are some steps you can take to get your New Year budget ready now – and to make it happen within the 2 months.
Step #1: Compare your Debts and Bills vs. your Incoming Funds
The first step on your New Year’s budgeting agenda is to review your bills from the previous year. Here you will want to collect all of the details you have on how much you owe towards bills each month and how much you have paid towards them over the course of the past year.
As a part of this important step, you also want to take a look at just how much debt you currently owe. To help with each of these areas, it is advisable to make a list of all bills (and amounts) and all debts with individual amounts – as well as a total tally of the entire debt load you are carrying.
At this stage, you will want to indicate which bills are those that will be carrying on into 2017 and while the majority of them likely will – ultimately, this will help you to get a clear picture of how much you will need to budget for at the beginning of the year as well as moving forward.
In terms of your debts, after you have listed of all of your ongoing debts, you can end this step by ranking your debts, starting with the lowest and moving towards those with the higher amounts. This organizational step can enable you to identify which debts may be the most harmful to your credit – as well as to set yourself up for creating a potential debt repayment plan.
Finally, you’ll also need to take into account how much money you have coming in versus going out. After you have determined this amount, you will compare it once again to your total debts and overall expenses, in order to identify whether or not you have been managing your finances as effectively as possible. If it is at this point, that you notice you are not saving enough or you are spending far too much each month, then step 2 will certainly come in handy.
Step #2: Identify Where you can Cut Back on your Spending
After you have clearly laid out all of your bills and debts, you are aware of their exact amounts, and you have identified how much money you have coming in, here is where you will need to make some decisions about where and how you can cut back. While cutting back on spending is never easy, step #1 will have helped to shine a light on where you are spending the most money, where you are spending unnecessarily, as well as instances where you are maybe even spending beyond your means.
Therefore, with these areas highlighted, you will then be able to take action and try to cut down on these costs. For example, are you spending too much on food – specifically eating out? Are you spending more on groceries, on entertainment, etc.?
In addition to these important realizations, another way to reduce your spending may be to focus on lowering certain bills, such as cable, phone, and internet – even ending certain services you identify as non-essential.
After you have adjusted the amount you will be spending each month, you are then ready to draft a new and improved version of your budget – and let it guide you towards a financially-successful New Year.
Step #3: Figure out How to Pay off More Debt
Now, getting back to the topic of evaluating your debts and creating a payment plan. While this is not necessarily a part of the budgeting process, it can however help to make your New Year’s budget more successful. This is because your budget should also be designed based on how much money you will be using to pay down your debts, so that you are creating a realistic budget based on your personal financial situation.
If for example, you can identified that you plan to increase your monthly credit card payments by $200, and you then need to make sure it is outlined in your budget. On the other hand, perhaps you are looking to put some additional money away in your savings account and make a lump sum payment off your mortgage or your car loan down the line. Again, this amount of money will also need to be included in your budgeting plans.
Now with that being said, if you have identified the need for more money to go towards debts or savings, then your New Year’s budget will ultimately need to reflect this and you may also want to go back to your spending totals and attempt to cut back even further.
All in all, these steps together can allow you to set yourself up for successful budgeting moving into the New Year. While everyone’s budget will be unique and require different adjustments, which may include certain debt-relief strategies – improving one’s finances is often a more universal requirement.
If it is a fresh start you are striving for this New Year, it is a good idea to start looking ahead and creating a budget that will align with your financial needs in 2017. Hopefully this process can enable you to improve your credit, and by taking action now instead of later, you will be able to enjoy each and every last minute that 2016 has in store.