If 2020 felt a bit out of control for you, you’re not alone. A volatile economy, a turbulent political climate, and an uncertain employment environment left us all feeling a little worse for wear, especially concerning our finances.
Whether you started 2020 with a firm resolution to be more conscious about your finances or not, spending days, weeks, and months at home likely saw that resolution go right out the window.
Online shopping definitely helped us all feel a bit better amidst all the chaos; food delivery services were an easy way to take the stress off the never-ending kitchen duty, and purchasing gift cards from our favorite local businesses was the best way to show our support and hedge against them having to close altogether.
As with any new year, 2021 holds a unique opportunity to start fresh with your personal finances. More time at home means you can be more mindful of your spending and take the time to make – and more importantly keep – your financial resolutions.
We’ve outlined five easy ways you can do just that.
Understand Your Spending
Now, as with anything, it’s best to start with data. If you already use one of the many budgeting apps available, you’ll already have an idea of how much you spend on what. If you don’t, this is where you should start. Understanding your current spending habits will help ensure you’re not setting unattainable goals, and you’re more likely to stick with the budget you create.
Next, and this may seem surprising, don’t worry about budgeting for the first month of 2021; simply commit to tracking what you spend and where.
Once the month is over, you might be surprised at how much (or how little) you spend on certain things. This new understanding will make the next part that much easier.
New Year, New Budget
You may have a 2020 budget you’re hoping to copy and paste for 2021 but, no matter how much has or hasn’t changed about your life, it’s advisable to start fresh with a brand new budget – taking the opportunity to reevaluate your spending habits and lifestyle changes to make sure it’s as accurate as it can be.
Below we outline a quick guide on how to create a functional budget that’s easy to stick to:
- Start with your total average monthly income – knowing precisely what you have coming in will help keep the rest of the budget realistic.
- Establish your monthly expenses for housing, food, utilities, and other needs. Take a look at the learnings from your previous tracking and be as honest as you can with yourself on what your needs are – your phone and internet bills would definitely apply, ordering take-out four times a week? Maybe not so much.
- Total the amount you spend on those needs each month and subtract it from your monthly take-home income.
- Whatever you have left is where you decide your priorities around wants and savings. We share some advice in the next section on how to navigate this, but it’s essential to level-set with yourself here since this is where you’ll make or break any resolutions around your spending.
- Put the budget into action but know it’s not set in stone. It’s best to give yourself a month or two to get into the routine and re-evaluate in a few months to make sure your budget works for you.
Decide your Financial Priorities
The essence of having control over your finances is how responsible and aware you are when it comes to your financial priorities and how much they, compared to your wants, dictate your spending habits.
That’s not to say every want you have makes you irresponsible with your money. You may want to spend more than most people on a particular fitness membership or a relaxing spa visit every couple of months. If having it be a part of your life makes you a happier, healthier person, that just means it’s a priority for you, and you choose to spend less on something that isn’t as important.
The same goes for how much you choose to save and for what reason. While saving for your future and financial security is very important, saving doesn’t always have to mean sacrificing your wants.
It is far more responsible to set money aside every month in anticipation of a larger purchase than putting that purchase on a credit card – accruing interest you have to pay down while you pay that (and other items) off. In that scenario, you’re allocating a certain amount of money every month toward the item anyway; it’s smarter to do it before and save yourself the interest than do it later and have it cost you much more in the long run.
Be Smart with your Subscriptions and Services
We all live in a subscription and services economy. There is no denying they present us with highly attractive options to tailor our spending on exactly what fits our lifestyle. Cable not for you? Choose from several different streaming services. Grocery shopping and meal planning your most hated chore? Sign up for an easy meal delivery service and never worry about dinner for you or your family again.
Convenience is at the heart of why we’re more than happy to pay for subscriptions and services, but we often lose sight of just how much of our budget goes toward the conveniences we love so much.
Suppose you subscribe to even a handful of TV streaming services alone. In that case, you’re likely spending upwards of $60 a month on just those, and that’s before you factor in music streaming, fitness apps, Amazon Prime, and the fees you pay to use services like Uber, Lyft, UberEats, DoorDash, etc.
We advise you to list out every one of the services or subscriptions you use, how much you spend on each, and then how much you spend on them together – $6 here and $14 there doesn’t feel like much, but they add up when those amounts are being paid 10-12 times in a single month across different platforms.
Pairing down to the ones you enjoy most is the quickest and easiest way to give yourself some more wiggle room with the rest of your budget.
Lean on the Experts
The moral of the budget story all boils down to two things: you probably have the opportunity to save more than you think each month or, at the very least, you can have a better handle on your spending as a way to relieve at least some of the stress you may feel due to your finances.
Another way to achieve this is by working with financial experts like us. After all, you’d consult a personal trainer (or sign up for a fitness app) to help with your fitness resolutions; why wouldn’t you consult a financial advisor to help with your financial fitness?