Most Americans’ New Year’s resolutions involve getting in shape, eating healthier and working out regularly. Whether your resolution included saving more money or not now is the time to consider developing a plan for you financial health for the upcoming year as well as your physical health.
In the same way it can be unpleasant to assess your current level of physical fitness and can be a painful process taking a realistic look at how you spend your money in order to build a better budget can be unpleasant, but much as you will be better for the diet and exercise making and following a financial plan will be worth the effort.
Getting started can be tough so here are some tips to organize your 2014 budget and get you started on your journey to financial wellness. Follow these steps and you too can have a successful household financial new year.
To Organize Your 2014 Budget First Determine Your Fixed Expenses for Last Year
When you organize your 2014 budget you first need to know what expenses are consistently the same. Your mortgage, rent or car payment are good examples of fixed expenses. If you are like most people these are drawn directly from your bank account making them easy to track. Some bills fluctuate month to month such as heating and electricity they are still considered fixed costs so take an average to get an idea of a monthly expense that will represent any month of the year.
Collect 2013 Flexible Expenses to Organize Your 2014 Budget
Flexible, or discretionary expenses can be more difficult to organize because they are more widely spread out. Look at your debit and credit cards as well as checks you may have written for things other than your fixed expenses. Create categories for the areas where you spend money such as gifts, clothing, eating out, hair stylist, and travel; anything that you see frequently in your spending. Don’t skip this step because you might be surprised to see where the bulk of your money goes.
Organize Tax Payments from Last Year
Almost everyone can rattle off how much they owed or what they got as a refund from the previous year’s taxes. It is much more important to know what you actually paid in Real Estate, Federal, State, City, Social Security and Medicare Taxes. You cannot lower bills if you aren’t aware of what you are already paying.
Determine Your Earning Potential for the Next Year
There’s no crystal ball that will tell you whether your business will boom or fail in the next year. You could be fired or promoted but to organize your 2014 budget you do need to estimate your top line revenue, or what your household income will likely be. Include salary, commissions, overtime and any stock awards based on an average of last year’s numbers.
Figure out How Much You Need to Save
When you look at your overall goals for your financial life you need to organize your 2014 budget to attain them. Pay yourself before your creditors, so work out how much you need to save off the top. How much do you want to put into your 401(k) and 529 plans? Can you pay addition money to the mortgage or other debts every month? Make sure you have this number before you organize your budget.
Make a Spreadsheet for the Big Picture
Now that you have an honest look at what you need to spend, how much you can afford to spend and where you can save the real work begins.
If you are budgeting for a family then call a family meeting and discuss the budget. Include the children to allow them to not only learn to budget themselves but to understand when you are in the store and say no to those new toys.
Even if you’re budgeting for just yourself, take the time to decide where you could cut corners. Which foods really need to be organic and which don’t? Are you overspending on gifts? Eating out more than necessary? Think about your big long term goals and what headway you can make toward them.
You may be shocked at how much fun you have saving money. I tend to think of it like a game. I enjoy challenging myself to find new ways to cut back so I can splurge in a bigger way later.
When I do spend money I try to make it work for me. Use discount cards or shop places with rewards programs.
Don’t think of organizing your 2014 budget as a negative, you aren’t trying to put yourself on a financial leash, instead you are trying to liberate yourself from one and work toward having the things that are most important to you.