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New Year, New Budget: How to Create a Budget for the New Year that Aligns with Your Goals
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As the calendar turns and a new year unfolds, it's the perfect time to reassess your finances and set fresh goals. This means crafting a budget for the new year that aligns with your finances and evolving life aspirations. You might be aiming to pay off credit cards, save for a dream vacation, or invest in your future; a well-structured budget is your roadmap to achieving these goals.
LESSON CONTENTS
Why budgeting for the New Year matters
Financial literacy is a major challenge in the United States. According to the P-Fin Index, basic financial literacy among Americans was 48% in 2023 and 2024 (TIAA Institute, 2024). This is one of the reasons why the majority struggle with their finances. However, you can be different and start bridging this financial gap by learning how to budget. As you know, life is dynamic, and your financial needs and goals change over time. A yearly budget reset reflects your current circumstances and future aspirations.
"A budget is telling your money where to go instead of wondering where it went." — Dave Ramsey
Updating your budget annually allows you to:
- Adapt to life changes: Whether you’re getting a new job, growing a family, or making a significant purchase, your budget should adjust to reflect these changes.
- Stay focused on goals: Regularly revisiting your budget keeps your financial goals at the forefront, increasing the likelihood of achieving them.
- Improve financial health: By identifying and eliminating unnecessary expenses, you can allocate more resources toward savings and investments.
For ongoing support in your budgeting journey, consider signing up for financial coaching with Ent. Whether or not, you’re an Ent member, our Certified Credit Union Financial Counselors can help you confidently navigate your budgeting and financial goals.
Assess your current financial situation
Before setting new financial goals and your budget for the new year, it's essential to understand where you currently stand. An accurate assessment of your financial situation forms the foundation of a realistic and effective budget.
Steps to analyze your finances:
- List all income sources: Dantus (2019) notes that “the first place to start is getting a complete picture of where your money comes from” (para. 3). Include your salary, freelance work, investment returns, and any other streams of income.
- Track your expenses: Review bank statements and categorize your spending into essentials (rent, utilities) and non-essentials (entertainment, dining out).
- Evaluate savings and debts: Assess your emergency fund, retirement accounts, and any outstanding debts like credit cards or student loans.
By rigorously analyzing your income and expenses, you can identify patterns and areas for improvement. Ent mobile and online banking offers tools that make this process easier. For instance, Ent’s Money Insight empowers you to view your accounts in one place. Moreover, you can automatically track and categorize your spending and visualize budgets.
Set achievable financial goals for 2025
No matter how small, setting realistic and attainable financial goals is a key pillar in the budgeting process. As they say, a journey of a thousand miles begins with a single step. Clear goals provide direction and motivation, making it easier to stick to your budget.
Tips for setting goals:
- Be specific: Define exact amounts and deadlines (e.g., save $10,000 for a down payment by December 2026).
- Prioritize your goals: Determine the most important goals and focus on those first.
- Break down large goals: Divide long-term objectives into smaller, manageable milestones. For instance, you can break down your long-term goal of a $1,000 emergency fund into monthly savings of $50.
By joining Ent, you can effortlessly track your progress towards these goals. Ent’s Money Insight tools allow you to set goals and monitor your savings, investments, and debt repayment.
Best budgeting tips for staying on track
Setting goals is easy, but working towards them requires grit. Similarly, maintaining a budget requires discipline and the right strategies. Here are some of the best budgeting tips to help you stay consistent throughout the year:
- Automate your savings: Set up automatic transfers that move funds from your checking to your savings account each payday. This way, you pay yourself first and minimize the temptation to spend.
- Use budgeting apps: Leverage technology to monitor your finances. Apps like Ent's Money Insight, You Need a Budget (YNAB), and EveryDollar provide real-time updates on your spending and savings.
- Implement the 50/30/20 rule: As the Consumer Financial Protection Bureau (2022) notes, “one rule to live by when budgeting is to use 50 percent of your income for needs, 30 percent for wants, and 20 percent for savings for financial goals” (p. 3). This percentage-based budgeting method is one of the best budget tips to follow. It simplifies budgeting and ensures a balanced approach.
- Review and adjust subscriptions: Regularly assess your recurring expenses. Cancel any subscriptions or memberships you no longer use.
- Set up spending alerts: Customize notifications on your budgeting or mobile banking app to receive alerts when you're nearing your budget limits in certain categories. This prevents overspending. With Ent mobile banking, you can set reminders and receive alerts on spending limits.
To succeed, budgeting apps are crucial. Individuals who actively use budgeting apps see immediate savings. For instance, YNAB has found that its users save approximately $600 in the first two months. Listen to our New Year, New Financial Plan podcast episode for more New Year budget tips from our experts.
Review and adjust your budget regularly
Your budgeting plan should be a living document that evolves with your life. Regular reviews ensure it remains relevant and are important for several reasons. First, they help you adapt to income changes. If you receive a raise or your income decreases, your budget should reflect this immediately.
Secondly, life is unpredictable. You will face unexpected expenses even if you follow the best budgeting tips consistently. Reviews help you adjust to medical bills, car repairs, or other unforeseen costs.
Lastly, they help you stay motivated. Seeing your progress boosts your confidence and commitment to your budgeting plan. Reviewing your budget monthly makes you more likely to achieve your financial goals.
Ent offers tools and resources to aid in reviews. Visualized bubble budgets using Ent’s Money Insight make it easy to monitor your spending and conduct reviews. Moreover, our certified financial coaches offer personalized budget coaching to help you navigate any changes and keep your budget aligned with your goals.
FAQs
What are the first steps to creating a budget for the New Year?
Start by assessing your current financial situation. List all income sources, track expenses, and evaluate your savings and debts. This assessment provides a solid foundation for your budget for the new year planning. You know where to make spending adjustments and which financial goals are realistic.
How can I stay consistent with my new budget throughout the year?
Consistency is achieved by setting realistic goals, automating savings, using budgeting apps, and reviewing your budget regularly. Tools like Ent's Money Insight or budgeting apps like EveryDollar and YNAB can help you stay on track by providing real-time insights and alerts.
What are some budgeting tips that help save money effectively?
Effective budgeting tips include:
- Automating your savings.
- Using budgeting apps.
- Implementing the 50/30/20 rule.
- Cutting unnecessary expenses.
- Using cashback or reward programs.
Regularly reviewing your expenses and negotiating bills can also lead to significant savings.
How can I set realistic financial goals for 2025?
Set SMART goals—Specific, Measurable, Achievable, Relevant, and Time-bound. For example, "Save $5,000 for my next car by the end of 2025" is a SMART goal. Also, breaking down larger goals into smaller milestones can make them more attainable.
Why should I review my budget each month?
Monthly reviews help you adapt to changes in income or expenses. Secondly, they prevent overspending and keep you aligned with your financial goals. Regular check-ins make it easier to adjust your budget proactively rather than reacting to financial shortfalls.
Citations
Consumer Financial Protection Bureau (2022). Learning about budgets. https://files.consumerfinance.gov/f/documents/cfpb_building_block_activities_learning-about-budgets_guide.pdf
Courtney-Rose Dantus (2019, June 5). Budgeting: How to create a budget and stick with it. Consumer Financial Protection Bureau. https://www.consumerfinance.gov/about-us/blog/budgeting-how-to-create-a-budget-and-stick-with-it/
TIAA Institute (2024, April 7). The 2024 TIAA Institute-GFLEC Personal Finance Index. https://gflec.org/wp-content/uploads/2024/04/TIAA_GFLEC_Report_PFin_April2024_07.pdf
*PLEASE NOTE: This article is intended to be used for informational purposes and should not be considered financial advice. Consult a financial advisor, accountant or other financial professional to learn more about what strategies are appropriate for your situation.
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