The New Year is days away and what better time to write down your New Years resolutions? Have you made any New Year Financial Resolutions? As you think about what you want for your family and life this coming year, make sure money management is a priority. Whether you are struggling with your finances and worry about a Houston bankruptcy, or if you think you’re doing great at managing your money, there is always room for improvement. Here are a few simple strategies to make sure you start off 2017 with a solid financial plan.
New Year Financial Resolutions
One easy strategy that many people overlook in importance is writing down an actual budget. Most people never take the time to sit down and outline all their expenses. If you don’t know where your money should go, it is likely you don’t know that much about where it is actually going. This is a missed opportunity.
Start with your monthly essential living expenses like housing payment (mortgage or rent), utilities, groceries, gas, insurance (home and automobile), medical costs (premium payments and prescriptions), debt minimum payments and child care costs. These are likely to be fixed costs that should not vary month to month. Then list your nonessential living expenses such as clothing, entertainment, dining-out, repair costs, debt payments after minimum, etc. These are variable costs that change month to month, which is where the next step begins.
The next step is to develop a limit for each of your budget categories listed above. It is easy to value your fixed expenses, so jot those down first. When setting a limit value for variable cost expenses try to pick a moderate amount, and not over/underestimate too much. You can always go back and adjust these down the line of you find yourself overspending or having an excess in any of these categories. Once you have your budget limits in place, put them into a budgeting tool such as mint.com or through your online bank. These services can send you email and text alerts when you near your budget limit, keeping you more in tune with your budget and preventing overspending.
Track Your Progress
Once your budget is outlined and limits in place take a month or two to watch how you spend your money. Are your fixed expenses staying as assumed? If not, adjust them to where they should be and keep an eye to make sure they stay fixed. Variability here could signal a problem (such as raised rates) that you were unaware of.
How are you doing staying under the limit in your variable cost expenses? If you find yourself overspending in one particular area each month (such as dining-out), change your habits to keep yourself under budget. If you find yourself with an excess in a variable expense category, take the average amount of excess over a three month period and cut it in half. Reduce your limit by that half and move the other half elsewhere.