6 Steps You Can Take Now to Get Your 2019 Budget Started Right
The new year is just around the corner, and there’s no better time to get your money in order by taking a fresh look at your budget. Taking these six steps now can set you down the right financial path in 2019.
1. LOOK AT THE MONEY COMING IN
In order to create a budget that works for you, first you need to know what money is actually coming into your bank account each month. Take a look at all of your money sources—after-tax income, side hustle income, etc.—so you can have a realistic idea of on what your budget should be based.
Not sure where to start? Look at your old paystubs and comb through your bank account to see those deposits. Spending less than you earn is a crucial part of budgeting, so knowing what you bring in every month is key.
2. LOOK AT THE MONEY GOING OUT (A.K.A. EXPENSES)
Budgeting is all about letting your money know who’s boss and telling it where to go. You want to look at all of the money that goes out of your accounts each month. In other words, what are your current expenses? Some common expenses include rent/mortgage, groceries, car insurance, gasoline, cell phone, utilities, entertainment, travel, etc.
Take a look at the last 90 days of your spending by combing through your bank account. This will give you an idea of how much you typically spend each month.
3. KEEP AN EYE ON YOUR CREDIT
If you’re planning on making a big purchase like a new home or vehicle in 2019, knowing your credit score is a must when you’re preparing your budget. Your credit score can influence the interest rate you pay on any loans you take out for big-ticket items, so you will need a clear picture of your score in order to correctly account for your monthly payments. And even if you’re not currently planning to take out any loans in 2019, it’s a good idea to monitor your credit score so you know it’s accurate and healthy when you do need it.
Luckily, it’s easy to find out what your score is. Discover offers a Free Credit Scorecard, and checking it won't impact your credit score. It's totally free, even if you aren't a Discover customer. Terms apply. Learn more here.
4. EVALUATE NEEDS VS. WANTS
Now you know your income and expenses—the basic building blocks of budgeting. Remember, the key is to spend less than you earn and still be able to budget for your current expenses, as well as savings and debt repayment. If you’re looking at your income and your expenses and wondering how in the world you’re going to make that happen, it’s time to take a closer look at your needs versus wants.
Rent? Definitely a need, considering you need a place to live. Sushi and a movie out? Definitely a want (a delicious one).
Take a look at all of your expenses and mark them as a “need” or “want.” Then, on a scale from one to five, rate your wants based on how much joy they bring you—five being “so much joy” and one being “meh.” If you need a place to cut, ditch those expenses that aren’t necessary and aren’t truly bringing you joy.
5. PLAN FOR UNEXPECTED AND IRREGULAR EXPENSES
No matter how perfect you think your budget is, there is almost always something unexpected that comes up. It’s easy to track recurring, monthly expenses. But tracking one-time, irregular expenses? A bit tougher.
Think about those irregular expenses that might happen quarterly or annually. Maybe your renter’s insurance bills annually or you have to pay a special city tax when tax time rolls around.
Life is unpredictable. Maybe you’ll get the job of your dreams and need a wardrobe refresh before starting. It’s a good idea to have some wiggle room in your budget for these very occurrences. You can call them “miscellaneous” expenses as a catch-all for those things that aren’t quite definable or expected.
6. USE A SYSTEM THAT WORKS FOR YOU
Once you’ve done these five steps, it’s time to work your budget. Using your income amount, create a list of budgeting categories and give them a dollar amount. Your total dollar amount in your budget categories should not exceed your income (or hello, debt!).
When you have every dollar accounted for, you have a financial foundation that can set the new year off right. However, you can’t just stop there. You need to track your spending to make sure you’re staying within budget.
You can go the old school route and track using pen and paper, or you can take advantage of a budgeting app that organizes everything for you. There’s no right or wrong way to track. The “right” way to track is the way you’ll actually use with consistency.
As you track, you can get an idea of whether you’re staying on the mark or not. If you’re not, you might need to adjust your budget or adjust your spending. Remember, a budget doesn’t need to be fixed and unchangeable. It should be something that works for you and your lifestyle.
Another smart way to give your 2019 budget a boost is by making the most of your credit card rewards. Discover will automatically match all the cashback you earn at the end of your first year as a member, and your budget will thank you. Terms apply. Learn more here.