It’s a new year, and that means many of us are setting our financial goals and our budgets for the coming months. You want to make sure that you are prepared for the coming year, and that your money is ready for the next few months. Here are some steps you can take to help you as you create your budget for the new year:

  1. Look at your past spending: The first thing to do is to get a realistic idea of what you spend on things. Look at your past spending. If you have personal finance software, this is a fairly simple task. (If you don’t have personal finance software, now is a great time to start looking for money management software and apps.) You can also look at checkbook registers, receipts and bank statements to get an idea of what your past spending looks like.
  2. Set your priorities for the coming year: After looking at your past spending, it is time to set your priorities for the new year. Decide which items should be reduced, and which spending (or saving) helps you reach your long-term financial goals. Decide what should be most important for the new year, and prepare to create a budget based around those.
  3. Analyze your cash flow: Once you understand your past spending habits, and once you know your budget priorities, it is time to analyze your cash flow. Figure out where you have money coming in, and follow what happens to the money, including what you put into retirement savings, and what ends up being spent unexpectedly. Look for financial leaks that can be plugged, and look for ways to increase your income.
  4. Create a realistic spending plan: You can now create a realistic spending plan. Take into account your goals and the realities of your spending. Create a plan that will help you cut back on spending that does not help you advance your goals, or that does not provide true enjoyment. Figure out how you can divert some of your income money to help you reach goals of paying down debt, building an emergency fund or saving for the future. Make it a realistic spending plan, though, and one that has room for unexpected expenses and mistakes.
  5. Recognize that you are creating a lifestyle: A budget should be more than just a piece of paper telling you what you should do; it should be a plan for a lifestyle. Your budget should reflect what’s important to you (whether that’s enjoying an evening out every so often, or giving generously to charities, or any number of other things), and it should help you reach your long-term and short-term financial goals. You will be more likely to stick to a new year’s budget if you create one that fits with your lifestyle.

Also, understand that if you get off track, you can make adjustments to return to your budget. Don’t assume that because you slip up one month there is no reason to try to stick with your budget going forward. Instead, resolve to do better moving forward and adjust your money habits to get back in line with your budget.

This is a guest post Miranda Marquit is a journalistically trained freelance writer and professional blogger working from home. She is a contributor for, Personal Dividends and several other sites. Miranda is not affiliated or endorsed by LPL Financial. The opinions voiced in this material are for general information and are not intended to provide specific advice and/or recommendations for any individual.

Creative Commons License photo credit: Camera Eye Photography


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Comments | 1 Response

  1. says

    I really think you are spot on with creating a realistic spending plan. I’ve tweaked my budget several times because I’ve set unrealistic goals for groceries and food.

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