What I didn't realize is I should be reviewing my budget at the start of each year and reset my budget
- Based on learnings and trends from the previous year
- To account for life changes I may have experienced
- To account for large purchases I plan to make in the new year
Budgets aren't made to be static or a one and done. They are meant to be a guide for your finances and should be fluid. Meaning they change based on your financial situation. Getting a new job, moving, wanting to buy a house or a car, getting closer to retirement all impact you financially. Including your budget.
A few big things changed for me over the last year that also had a financial impact - I bought a house and started working with a financial advisor. While I did make some minor adjustments to the categories these things impacted in my budget I didn’t fully examine how they impacted my overall budget.
Related post: How I Decided I Wanted to Buy a House
Now that a new year is beginning I’m taking a fresh look at my personal budget to see what should be adjusted. Here are the three things I’ll be doing to reset my budget this year.
1. Reviewing the previous year for trendsI want to see if there are certain area that I tended to over or under spend in. And by how much. Where was my money being spent over the last 12 months? Was more of it going towards food, housing, entertainment or something else?
Related post: Four Ways to Save Money on Groceries
2. Updating spending and saving categoriesThe ultimate goal here is to make sure I’m not spending more than I’m making so I’m able to save money each month. Using the trend information I gathered from the previous year I’ll be able to.
- Create new categories need for areas where I’m now spending money or for additional income
- Remove categories where I’m no longer spending money or for income streams that are no longer valid.
- Consolidate categories for things that may now be bundled together or shouldn’t have been separate in the first place.
I’ll also dive into each of the categories to see if my budgeted amounts make sense. I don’t want to budget too much or too little as that could throw off my whole budget.
3. Setting goalsWhen I first started budgeting I set financial goals for myself. This is something I stopped doing probably five years ago. Yikes! Once I’ve worked through my 2017 budget I’ll be able to see how much I can save each month and set quarterly goals. This will help me set aside money for future large purchases and perhaps increase my retirement savings.
Are you resetting your personal budget for the new year?