10 Tips for Building a Budget and Savings Plan in the New Year
The new year means new beginnings. The start of 2022 is a fresh chance to ensure your current and future financial health. Every day this year will be an opportunity to rely on time-tested methods to create an up-to-date budget and a savings plan that works for you.
Follow these 10 easy tips for practicing sound saving and spending habits.
Your 2022 Checklist for Smart Budgeting
Budgeting is about controlling what you can control. Everybody’s budget, spending and savings plan is different. In fact, yours will be as unique as you are. It’s important to make your plan fit your lifestyle and goals.
You can review this checklist throughout the year and make adjustments, if needed.
- Define goals.
To reach our financial goals, it helps to first define exactly what they are. What goals inspire you to take the next step and allocate your income in deliberate ways? Setting both small and large goals can help you make short- and long-term choices to hit multiple financial targets over time.
- Know your income.
Knowing how much money you make each month helps you responsibly divide where it goes. If you’re paid roughly the same amount every paycheck, then it’s easy to plan expenditures that stay consistent with your income. If your pay fluctuates, then calculate an average of your earned income over the last year.
- Detail typical expenses.
Do your spending habits promote your lifestyle, goals and values? What needs to change? It’s helpful to divide your expenditures into a few categories: needs, wants and savings.
- Allocate assets appropriately.
Commit to a budgeting method. Check out Key’s budget worksheet, which provides you with the most common framework – the 50/30/20 budget. This budget sets aside 50% of your income for needs (essentials like living expenses and healthcare), 30% for wants (leisure, travel and other discretionary expenses) and 20% for savings.
- Specify sporadic expenditures.
While it may be tough to predict the cost of activities that come along infrequently, such as a sporting event or concert, consider setting aside enough to cover what you spent last year. If these funds remain at the end of the year, then they can become a source of bonus savings.
- Drill down on debt.
Effective budgeting means paying back debt on time to avoid unnecessary costs for late fees and to build and protect your credit score. In some cases, paying back debt early can save you a substantial amount of money in the long run. Use this infographic to better understand debt consolidation, in which you pay off several debts and replace them with a single balance.
- Build your reserves.
Savings are your friend. Set aside a fixed amount of money or percentage of your income in a savings account each month. Having an emergency fund – enough to cover at least six months of expenses – is essential to help you weather unexpected events, such as a job loss or healthcare issue. Most people save a little at a time, over years. Key’s savings calculator can help you plan your savings well into the future.
- Keep track (to stay on track).
Consider using a budgeting app – most are free or low-cost – to understand your spending habits and progress in adhering to your plan. Create a new habit to check your accounts regularly.
- Be price-aware.
The price of everyday goods and services is on the rise. Having a handle on the current costs will help you stick to your budget. Delay big purchases to allow the price to stabilize or go down – this will allow you more time to save as well.
- Stay the course – but be flexible.
An established budget should stay static unless your income or life situation necessitates changes. Ask a trusted friend or family member about their approach to saving. Information is power.
A New Year, a Fresh Start for Your Budget
Sound finances are a result of good planning and decision-making over time. With practice, everybody gets better at budgeting.
The new year is a golden opportunity to take stock and chart a positive path forward. Stick with these tried-and-true financial lessons – no matter if you’re building a budget for the first time or are a seasoned veteran.
At this time next year, you’ll be thankful – and even stronger financially heading into 2023.