Part of the yearly ritual for the yuletide holidays among many people is that of evaluating their budget to avoid overspending during the last few months of the year. This is always a good practice; however, why do it only for the last part of the year? Extend the habit and deal with your 2017 budget.
If you are up to it; then, get a calendar, open your spreadsheet, or any kind of system you want to use and let us work together on your budget. Consider these tips on how to go about it.
• Prepare for Changes – As early as you can, anticipate changes, such as a college tuition fee or a new home mortgage. Include these expenses in your budgeting plan beforehand even you are not certain as to the final amount required. Taking a long time to find out the exact value for such expenses may disrupt your other important expenses.
On the other hand, you could be expecting welcome changes which you must include in your planning, such as a expected salary increases, bonuses and commissions.
• Be Conservative in Your Estimates – When anticipating the value of a certain future expense, make conservative projections. Add a certain percentage to the expected expenses while subtracting the same percentage from anticipated income raises or commissions. Although most people do not consider this prudent, being conservative provides a buffer in case the future turns out to be contrary to your expectations.
Always expect staple expenses such as utilities, groceries and gas to increase as they always do. At it stands, a 2% increase will cover inflation in majority of regular expenses. However, gas and utilities should be given a higher expected rise since they are hard to predict whether in terms of usage and price.
• Evaluate Previous Results – Before the year comes to an end, you should already have a very good conception of the objectives you wish to achieve for the year and which goals you will not achieve. Based on your evaluation, you may have to slow down on your expenses, augment your savings, reduce your debt or make necessary changes accordingly.
This recommendation also applies to your method of monitoring and distributing your budgetary expenses. Do you have difficulty finding out if you achieved your financial objectives? And you have to tear your budget and make a new one each month? Try juggling your budgeting strategy.
Try this: When you find yourself always failing to meet your savings target, resort to the “bucket” method. Assign portions of your income to designated buckets, such as one for monthly expense and another for fixed monthly expenses such as rent/mortgages and also one for discretionary funds. Allocate funds for the monthly expense and savings buckets prior to your discretionary funds.
• Assign New Targets – Adjust your objectives according to your evaluation and recommended changes. For instance, you may want to speed up your savings to address a down payment need for a home purchase, while preparing for interest fees to go up in the following year (which is a probable event, in our opinion).
• Make Necessary Changes in Your Budget – When you are finished with your amended objectives and assumptions, change your budget to cover the following year’s conditions. Having a monthly budget suits the situation for many people; but you can pick an appropriate schedule that suits your unique lifestyle.
Is it proper to project a budget for 2018? Not really. No one has enough information to project that far ahead. Nevertheless, you should consider forward-looking expenses, purchases and salary increases in your present budget. For instance, if you are expecting to spend for a college education in 2020, the best time to prepare for it is not later than today.
You should congratulate yourself for deciding to get ahead of the race and planning the New Year’s budget before most people even think about it. Half the battle is already won, in your case. Develop the discipline to follow your plan for the entire year as much as you can. That is how you win the other half.