Budgeting for the New Year

The beginning of the new year is the perfect time to reassess your spending habits and set yourself up for financial success. Follow these tips to help you get started on your budget for 2025.

Assess Your Current Monthly Spending

• What was your monthly income last year? If your income varied, take an average. There is an average of 4.345 weeks per month. Knowing your income is vital for determining how much you can afford to spend.
• How much money did you spend in each category? Break your spending down into specific categories: rent/mortgage, groceries, social activities, entertainment, etc. Be thorough when examining your spending—don’t let any dollar go unaccounted for.
• How much did you save? A common rule of thumb is to spend 50 percent of your income on needs, spend 30 percent on wants, and save the last 20 percent.
• How much did you have left over? If you didn’t have much money left over after all your expenses, you may need to cut back in certain categories.

Plan for the Future

• Has your income changed this year? If you have received or anticipate receiving a raise, that should affect your budget. Remember to also account for any secondary sources of income, such as side hustles, dividend stocks, and rental properties.
• Have your expenses changed this year? Perhaps you’ve signed a new lease or taken out a loan on a home or car.

Make Adjustments

• Evaluate your priorities. You may decide you don’t need to spend as much in a certain category, or that you should be spending more in another.
• Start an emergency fund. Even with careful budgeting, you’re likely to have unexpected expenses at some point in the future. You may lose your job, your living situation might change, or you could experience a medical emergency. Most financial experts recommend setting aside three to six months’ worth of expenses so that you’re covered in the case of these events.

Your financial circumstances can change greatly in 12 months. But with these tips, you’ll be well prepared to manage your money responsibly this year. Contact us today for more financial advice!

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