How to Prepare Your Budget for the New Year

NEW YORK, January 12, 2022 (Newswire.com) - iQuanti: If you've been living from a budget for the last year, it may be time for a refresh. Sometimes a budget can turn into an expense tracker that's not really serving to move you toward larger financial goals. But taking time to step back and reset can help.  

Here's how to prepare your budget for the New Year and re-focus on your financial priorities.  

Reflect on the Past Year  

Before you create a budget for the coming year, it's critical to reflect on where you've been. First, sit down with last year's spending and budgets. Then ask yourself tough questions like:  

Do you feel like you were able to stick to the budget?  

Were there any budget categories that were consistently over?  

Did any budget categories repeatedly go unused?  

What were the wins from last year when it comes to spending money?  

Do any financial mistakes come to mind you want to avoid in the upcoming year?  

After you answer these questions and discuss them with your family or a partner, you'll be in a better position to approach your budget for the new year.  

Plan for Anticipated Expenses  

Each year is different, and spending will fluctuate accordingly. If you know a major life event or big cash outlay is in the future, strategically set up your budget to accommodate and save in advance.  

For example, if you're pregnant, you may know in advance that the coming year needs a line item each month for baby expenses. Or maybe your car is on its last leg, and you know this is the year you'll need to shell out for a new one. If you start saving for known financial events at the beginning of the year, you'll have the opportunity to stash extra money to cover some costs before you incur them.  

Set Your Big Goal for the Upcoming Year  

It can be much easier to plan a budget for the coming year when you have one focus. For example, maybe next year is the year of debt repayment, where you'll allocate every extra penny to the debt. Or perhaps you want to focus on savings and securing your financial situation and are considering buying a whole life insurance policy to support that goal to offer permanent life insurance protection for your loved ones. Whatever it may be, define one big goal and commit to making that the financial focus of your year. 

Create a Budget that Aligns with Your Focus Goal  

Now that you've reflected, are aware of upcoming expenses, and have one goal to focus on, you're ready to create your budget. As you work through the budget, plan to:  

Budget for spending and savings. 

Leave a cushion for unanticipated monthly expenses. 

Give every dollar a purpose (that means anything leftover each month should go somewhere, like an emergency savings account). 

The Bottom Line  

Spending based on a budget is one of the most effective ways to hit financial goals. And the New Year is the perfect time to take a step back, reassess your current budget, and make changes. By focusing on areas of improvement from the prior year, upcoming expenses, and a big financial goal, the upcoming year is sure to move you closer to where you want to be financially. 

Source: iQuanti, Inc.