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New Year, New Budget!

Posted by Lyndsey Delatte on January 01, 2018

 

Start the new year off with a new budget.

Ready or not, 2018 is here!

Remember the Boy Scout motto: Be prepared! A brand-new year, always ripe with resolutions, is the perfect time to reassess your financial attitude, improve, and vow to do more

Have you taken any steps to prepare for the financial realities of the new year?

Here are some tips to get you started:

Tune your budget

It’s a great idea to begin the new year with a plan. A budget is just that-a plan that starts with the income you expect, along with your fixed expenses, such as rent or mortgage costs, homeowners association fees, insurance, utilities and transportation costs. The plan also incorporates your savings goals.

Then, the money remaining is designated for your other expenses. A realistic budget will help you set your financial goals and remind you to stick to them. The new year is the perfect time to assess last year’s budget or to create a new one if you don’t yet have one in place.

Reviewing where you spent last year’s money will help you make better choices in 2018. If you did not save money for retirement, for example, this can be a new budget item.

While planning for this year, make sure to include a method for tracking your spending. You can do this on a spreadsheet or you can simply tag items in your financial account.

Even with a solid strategy in place, there will always be surprises along the way. Losing a job, a leaking roof or an illness can throw off your entire plan. Be sure to build an emergency fund into your budget.

Plan ahead to meet your goals

Next, consider how you will accomplish your goals. You’ll have short-term goals, such as purchasing a new car or home, as well as long-term goals, such as saving for retirement. Each set of goals requires a different kind of planning and saving.

Financial planner, Rachel Rabinovich, recommends setting up a separate savings account for each goal. This way, you can easily track your progress.

Experts suggest working backwards to determine how much you need to save for a specific goal. For instance, if you dream of taking an expensive vacation two years from now, determine the total cost of the vacation and then establish a reasonable time-frame and the amount you’ll need to save each month to reach that goal. Make sure the amount you plan on setting aside each month is doable, or you may just have to move your goal over by six months or more. The good news is we already have the tools you need to help you get there. Log in to online banking and take advantage of our budget tracker.

Spend mindfully

You can also make your financial future more secure by identifying the difference between your needs and wants. Needs are necessary for your survival, and include items like food and shelter. Wants are things that are not necessary but you would like-such as a luxury car or European vacation.

First, tend to your needs. Then, based on what’s left to work with, consider your wants. This might sound obvious, but for many of us, the line between wants and needs is often blurred. This can lead to awfully tight financial situations, even prompting us to “borrow from Peter to pay Paul.” By clearly differentiating between what you want and what you need, you can avoid this outcome in 2018.

Maximize retirement contributions

Retirement plan contributions can be a valuable source of savings, especially if you have the option of employer-matched funds. If you do, be sure to take advantage of them!

Also, check with your HR contact and your accountant to make sure you are contributing the optimal amount to your 401K and IRA. Each year, you can contribute $5,500 to a Roth or traditional IRA, or $6,500 if you are making “catch-up” contributions. Let us know what your investment goals are and we will connect you to a financial expert.

Plan your holiday spending beforehand.

Avoid going overboard on your holiday spending. Think three times before you pull out your credit card. Going over budget now can mean spending the first few months of 2018 playing catch-up with your credit card bills. Spend less, and start the year off with a clean slate! Open a Christmas club account and relieve holiday stress for 2018.