Evaluate and Establish Your 2019 Budget
Get your financial house in order
Did you know that only half of Americans have a budget and spend time proactively monitoring their finances? No matter what side of that fence you fell on in previous years, the start of a new year is the perfect time to re-evaluate and establish a budget. By creating a budget now and keeping track of it throughout the year, you can get your financial house in order and be on track to fiscal wellness. Here are some tips to get started on building your budget.
ASSESS MONTHLY EXPENSES
The first thing you should do when creating a budget is assess your monthly expenses.
Knowing what you spend each month is key to starting and sticking to a budget. Once you’ve corralled what you’re spending and where, determine if there are areas to cut, change or eliminate. Some changes may include re-evaluating car and home insurance rates and phone contracts. Subscription services, gym memberships and donations can quickly add up as well, so make sure you’re intentional in these areas. You can also review your credit cards and see what interest rates are currently being charged. It’s possible to request to have them lowered or you can consider consolidating all of your credit card debt to the account with the lowest interest rate.
KNOW WHERE TO CUT
Clothing, coffee shop spending and eating out can consume a large portion of your funds. Evaluate how much you can afford to spend on these items and stick to this budget throughout the year. Closely managing these expenses can help you stay on track toward reaching your more significant financial milestones.
SET GOALS ALONG THE WAY
One way to kick off your budget planning is to set smaller goals throughout the year. These mini goals make achieving larger financial objectives easier to manage.
For example, if you want to save up for a vacation at the end of 2019, set up a savings account specifically for this purpose. As you save, you can either reward yourself with something small, like a new book or a lunch at your favorite place, every time you reach an increment of $500 in your savings account, or you can set a goal to reach $500 by May 1. However you decide to do it, slicing it up into increments helps you stay on track as you hold yourself accountable throughout the entire year.
While the start of a new year might feel like it’s brimming with possibility, make sure your budget goal is practical and achievable. Allow yourself enough money to live on and still have a little fun. If you set too strict of a budget, you’re likely to get frustrated and quit. A good suggestion to set a manageable savings goal is to initially increase the amount you are saving by 2 percent. As time passes, consider increasing this amount to create a larger savings account by the end of the year.
REVISIT THROUGHOUT THE YEAR
A budget doesn’t have to be set in stone. Create your budget and stick to it for a couple of months, then sit down and re-evaluate. There might be areas that need to be adjusted and then readjusted.
When it comes to creating and sticking to a budget, the smallest steps can lead to big results. As you head into 2019, take some time to review your financial situation and create the best budgeting options that work for you and your lifestyle.
Karen Bohn is UMB Bank's EVP consumer and mortgage client delivery director.