Budgeting for the New Year

Despite our best intentions, New Year’s resolutions often fade fast. Nebulous goals to “spend less” or “save more” give way to the inertia of our daily habits. Staying accountable to your New Year’s resolutions requires some concrete planning and budgeting. Here are a few simple steps to help you budget for the whole year ahead, well before your resolutions fizzle in February:

Look ahead by first looking back.

As your W2s arrive and you begin to start thinking about filing taxes, you will probably take note of your income and expenses from last year. Understanding last year’s money flow will help you to identify big picture patterns in the way you earn and spend. Although your year-to-year expenses will vary, anticipate those patterns and use last year as a baseline to set your budget for the coming year.

Set specific savings and spending goals.

Do you want to save a certain amount for a mid-year vacation? Are you looking into buying a home at the end of the year? Perhaps you don’t have any major purchases on the horizon, but you just want to spend less on luxuries like morning mochas or new shoes. Whatever your ultimate goal, have a specific number in mind. The more precise you can be, the easier it is to hold yourself accountable. If you have more than one savings goal that you are striving toward next year, it could be advantageous to open additional savings accounts. Identify a dollar figure you want to save this year and write it down in January. Then, build toward that savings goal by cutting down on splurge spending and automating your savings.

Automate monthly payments and savings.

After you see patterns emerge in the flow of your money, set up some automatic transactions from your primary account. Have a set time during each month, perhaps after receiving a paycheck, that you push payments for eligible bills and expenses. After taking care of bills and debt payments, identify a certain amount you would like to automatically transfer to a savings account each month. It doesn’t have to be much. An automatic deposit of $50 per month into a savings account yields $600 at the end of the year. Automating these transactions helps you avoid the temptation of spending money as it comes to you, and mapping this out in January gives structure to your savings plan throughout the year.

Track your progress and treat yourself along the way.

Budgeting doesn’t always have to be restrictive. Set some monthly—or even quarterly—benchmarks for yourself, and allow for some indulgences as you reach your milestones. Build this into your budget at the start so you aren’t going “off the books” to buy things you know you want. Having periodic benchmarks on the way to your ultimate goal will help you stay on track, even when your other New Year’s resolutions have long since faded.