How to Budget for a New Year

It takes a while to learn how to budget. That's no reason, though, not to get started. If you're worried about your finances, the worst thing you can do is ignore the situation: it's absolutely essential that you find a way to bring your budget under control. And the easiest way to do that is budgeting.

Although it takes some time and effort to learn how to budget your money, the process itself is not that difficult. Depending on your financial situation and how much you trust yourself, there are a number of ways to handle budget planning. Here are a few to get you started.

Budgeting for the new year

No matter what sort of budget planning you are going to create, they all start the same way: with keeping track of what you spend.

An easy way to do this is to make all purchases on your debit or credit card for one month. Then, at the end of the month, you'll be able to look at your bank statement and see where you spent every single penny. Don't allow things like mysterious withdrawals that went 'somewhere.' If you have to take cash out, keep the receipts and write down what you spent it on.

Either way, at the end of the month you should be able to see exactly where you spent your money. Divide your purchases into categories like bills, food, entertainment, etc. and see how much you spent in each category. Now add up your income vs your expenditures and see how you did.

The hard part

This is where budget planning differs for individuals.

-If you're doing pretty well... then keep going. Jot down an approximate goal for each category and, throughout the next month, keep an eye on your spending. At the end of the month, repeat the budgeting procedure and see if you need to make any changes.

-If your expenditures seriously dwarf your income... it's time to make some major changes. Go through your expenses and see where you can cut back. Do you need to eat out twice a week, or could you make some dinners at home? Are your daily lattes a necessity? Give yourself a set amount to spend in each category and stick to it.

-If you know you're the kind of person who has difficulty sticking to a budget, learn how to budget your money with cash. Switch from debit and credit cards -- almost impossible to track over a month -- and physically withdraw the amount of cash you have for each category.

For example, if you've decided you have $100 for entertainment, withdraw $100 and put it in a special wallet or jar. When that money is gone, you can't spend any more that month. This will help you keep your spending under control since you will actually be able to see the money and how much remains.

If you follow these tips, you will have no problems learning how to budget for a new year!


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