Resolutions 2016: Budget Your Way to Your Financial Goals

It may sound like as much fun as having your teeth drilled, but budgeting really isn’t that bad. Here are six easy steps to achieving your financial dreams.

Are you part of the 37 percent of Americans who are making financial resolutions for 2016?

According to the Fidelity 2016 New Year Financial Resolutions Study, more than a third of Americans will make financial resolutions and of those, these are their top three goals:

  • Save more money: 54 percent
  • Spend less money: 19 percent
  • Pay off debt: 16 percent

Interestingly, only 10 percent of those making financial resolutions are planning to make and stick to a budget. But I have a little secret for you. Making and sticking to a budget can help you achieve any and all of the above resolutions.

Regardless of whether you want to save more, spend less or finally take that trip to Tahiti, a budget can get you there.

From our Solutions Center: Click here to effortlessly track your expenses, free

Step 1: Set your goal

The first step in the budget process is simple. Ask yourself: What do you want your money to do for you? Here are some ideas to get the wheels turning:

  • Do you want it to buy you a vacation?
  • Do you want it to buy you a house?
  • Do you want it as a security blanket in the bank?
  • Or would you merely be happy if it would pay the bills each month with a little left over?

Budgeting can help with every one of these goals. In addition, by having a concrete goal, you increase your chances of sticking to your budget. Some people even create dream or vision boards with photos representing their goal to motivate themselves.

Step 2: Track your expenses

Next, you need to get a handle on where you are spending your money. This step is important for two reasons:

  1. It can help identify leaks in your budget, such as the $100 a month gobbled up by daily fast-food breakfasts.
  2. It can help you make a realistic budget. If you are currently spending $800 a month on groceries, budgeting for $500 is probably setting yourself up for failure.

The old-fashioned way to track expenses is to collect your receipts and keep a log of every penny you spend for the next month. However, you can make the process much simpler by signing up for a free account with our partner PowerWallet. This service tracks your expenses automatically and neatly categorizes them for you. Best of all, it doesn’t cost a dime.

Step 3: Write it down

Now that you’ve tracked your expenses, you can use those amounts as a guide to create a written budget. Whether you use an online tool, Excel spreadsheet or a notebook and pen is up to you, but you want to have your budget recorded in a location where it can be easily accessed and changed as needed.

My personal advice is to always estimate your income low and your expenses high. It’s better to reach the end of the month and find you have extra money in the bank than to come up short.

In addition, make sure you put a name to every dollar. Maybe you finish with the monthly bills and have $200 left over. Don’t leave that as a catch-all slush fund; decide what you’re going to do with it. Maybe $100 will go into an online savings account, $50 will be an extra debt payment, and $50 will be mad money.

Step 4: Monitor your progress

Once you have it written down, don’t ignore your budget. Make a point to compare your actual expenses with your budget on a regular basis, such as each payday.

If you’re using PowerWallet, it’ll be easy to quickly see how much you’ve spent so far in each category for the month. Then, you can make adjustments as necessary. For example, if you’re budgeting $50 for clothing and have spent $75, you’ll need to not only stop buying clothes, but also make an adjustment elsewhere in your budget to make up for the extra $25.

On the flip side, maybe it’s the last week of the month, and you haven’t spent a dime of your entertainment budget. In that case, it’s time to make a date and go have some fun!

Step 5: Get a coach

Maybe you’re feeling overwhelmed. A budgeting coach can help. You can start with the National Foundation for Credit Counseling and the Financial Counseling Association of America. But never deal with any credit counseling organization without checking the Better Business Bureau and your state’s attorney general’s office for consumer complaints, as well as online complaint sites. Find out if a fee is charged. You should be able to get budgeting help for free.

As an alternative, you can ask a money-savvy friend for help. In either case, having someone walk with you step-by-step through the budgeting process can help make more sense of how to create a realistic spending plan for your money.

Step 6: Stay flexible

Finally, your budget is a living document. Unlike your rotisserie oven, you shouldn’t set it and forget it.

You should be regularly evaluating it and making changes as necessary. Always blowing through the food budget? You may need to increase that and consider where else you can cut back. In addition, as your income or expenses change or as you meet goals and identify new ones, your budget should be adjusted to reflect your new circumstances.

Ultimately, your budget is not about restricting your money; it’s about empowering it. A good budget finally puts you in control of your dollars and allows you to dictate where your money is going rather than letting your bank account get nickel and dimed by what may amount to silly, incidental purchases.

Do you have a budget? If not, what’s stopping you? Tell us about your budgeting concerns in the comments below or on our Facebook page.

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Comments

  • norman1211

    save your coins just TOSS it to your empty plastic containers and after a few months you will be surprise how much money you save

    • Rosana

      Interesting. Your comment reminds me that small steps do work if you’re able to apply them on a regular basis.

      • norman1211

        no amount is TOO small in saving

  • Rosana

    It may be interesting to find out why it seems challenging for many people to keep up a budget. I imagine there are diferent reasons and feeling unconfortable about one’s personal financial limitations is one of them. Perhaps using a budget is like everything else in your life, you have to succeed in making it a habit.

  • KaraLynn

    One reason my budgets always failed was because after one minor slip-up, I would blow the whole thing. I used to think “Well, now that I’ve screwed up, I don’t care anymore”. Also, I used to be an online emotional buyer. After I paid off my small limit credit card, I would reward myself by shopping online and paying with, yep, that same credit card. Boom! Maxed. I hit rock bottom and decided enough is enough. My spending was out of control and completely inexcusable. I’m still not out of the woods, but I’ve come a very long way with patience and persistence!!

    • Tammi Carson

      You’ll make it. The fact that you admit you have a problem and that you are willing to work at it is the main thing. I’m in debt myself but I did it because I was kind and helped Family out and now I’m paying the Price. I lent Money to my Cousin, he kept whining that he couldn’t pay me back but he always finds ways to party and stuff. I no longer associate with him more than I have to. I am also following the words of this article and if I can do it, you can do.

    • norman1211

      admitting that you have a problem is a good thing, at least you RECOGNIZED your fault, but the REAL challenges is turning around that problem into something that is CONSTRUCTIVE, in a every SITUATION in life that we encounter we learned something VALUABLE on it, just have TONS of patience and i believe you WILL overcome it, KEEP the FAITH, Mate!

  • Reasongal

    The high balance, high interest credit cards just freak me out when I see how the interest pumps up the payment and I’m afraid I won’t be able to pay those payments. So when my monthly money comes in, I tend to throw double the minimum payment at it and then scramble to cover everything else that comes in. I pay so damn many bank charges for overdraft (at least they cover them) it’s ridiculous. And I’m 50!

  • NoCellPhones

    None of us are born money managers. It takes practice and thought. A close friend would like to own a house. I’d love for her to realize her dream. I suggested she track her expenses/spending and try to determine her “needs” from her “wants” and then look at ways to cut her costs. For example, do you NEED that new video game or could you put that money toward saving for a house? I attempted to give her tips to save money and sent her a few books on the subject. Her response was she is “very resistant” to this idea, implied she doesn’t have extra money to save, and kidded that she’d prefer to be given a house or win the lotto. It’s frustrating, BUT she did NOT ask me to help her, so I decided to butt out. Not everyone is willing to do the work to budget. Lesson learned.

  • Georgia Wessling

    I got out of debt with a hint I had learned in the banking business. Pay your bills on time, every time. We had about 10 cc’s and $28-32k in total balance. So, I always paid on time, even if I had to take cash from one cc to pay another. I got the best rates at the time. An article said that if your interest was at 14% you were ahead of the game. At that time, all my cc’s – down to 3-4 by that time – were at 9.99% UNTIL PAID OFF! Then I got an offer for 4.99% until paid off. Transferred immediately. Made one goof. I called and took the new rate. However, I had just mailed a $1k payment which hadn’t arrived yet. So it didn’t come under the 4.99. It was at 16%. But it still averaged out to just over 6%, so I was still ahead. The last 3 years of our debt, I got the 0% for one year. That is only to get you to their business, so I had to get a different one each year. It took 15 years, but we were out of debt 3 years before I retired. So – for the last 13 years I have paid my cc’s fully each month. You can’t begin to imagine the feeling it gives you. I’ve not paid a cent of interest in 13 years and they have paid me just over $5k. Slower build up now as you don’t get quite the benefit you used to.
    Only one bit of advice – never give up. It takes time, but it is worth it to the max. I hope this helps. A final note – what helped me was seeing a customer who had the same problem as I did (10-12 full cc’s) and she was down to 3 when she came to me to see if the offer she had just gotten from a cc company would help her. It did and in the next year or two, she and her husband were debt free. That also gave me the belief that I could do it too.

  • SuzieQ

    I am doing okay, but this coming year for the first time I am going to track spending. For me, I think it is the first step. I am not a big spender, but bills often surprise me because I do not have a list of yearly expenses and due dates on them.

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