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2021 Is Here! 3 Budgeting Resolutions for the New Year

It is time for the new year, a new budget, and a brighter future for you and your family. Make 2021 the year you finally take control of your financial life. Use these tips to create a realistic budget which will let you pay down your debts and give you the opportunity to put something away, while not forcing you to live like an ascetic to make it happen.

Gather the Facts

Before you do anything else, you need to know how much money is coming in and how much is going out each month. 

For people who receive a regular paycheck, estimating the amount of money coming in is as simple as calculating your post-tax income. But for anyone whose income varies throughout the year, things can get much more complicated. A relatively safe way to budget with an irregular income is to use the lowest-earning month from the previous year as a baseline for creating a budget. A less secure, but probably more realistic way to budget, would be dividing the last year's income by 12 and using that number as your monthly budgeting baseline. 

Once you determine the amount of money which is coming in, you need to know what you are spending on a monthly basis. Average the total amount of the money you spent monthly over as months as possible to create your average monthly expenses. Separate this average monthly expenses into two categories: needs and wants. Needs are bills you have to pay, like housing, food, insurance, basic utilities, minimum loan repayments, and transportation. Everything else is a want. 

Determine a Budget

Without a good plan, you won't make your financial goals. 

There are lots of different ways to set up a budget, but the most important thing is that is that it works for your situation, and you can stick to it. One simple, yet effective budget, is the 50/20/30 plan which Senator Elizabeth Warren popularized in her book, “All Your Worth: The Ultimate Lifetime Money Plan." According to this budgeting method, half of a person's income should go towards needs, a fifth can go towards savings and additional loan repayments over the minimum, while the remaining 30 percent is for everything else. 

Adjust Your Spending Habits

A budget only works if you are willing to change your spending habits. 

For many people cutting down on spending is a painful experience. But there are ways to make it a little less uncomfortable. 

  • Control impulse purchasing. While you are still at home, make a list of items you will purchase and don't give in to temptations at the store. If you see something which you really want in the store, write it down to buy on your next visit. It is amazing how many 'must-buy' items lose their attractiveness after a few days. 
  • Use a credit card, but pretend it is cash. The advice used to be that you should always use cash when you shop, but cashback and other incentives from credit cards makes using them a great deal. But never spend more money than you have in your 'want' budget for the month. Consider asking your credit card company for a lower limit to dissuade you from making larger purchases. 
  • Avoid the 'little luxuries.' Small expenses can really add up. Stop visiting your local coffee shop every morning for a latte and start bringing your lunch to work, and it won't be long before you notice substantially more money in your pocket without sacrificing a whole lot. 

Remember that budgeting is an ongoing process. You will need to revisit your budget plan from time to time to make sure that you are staying on track. Sometimes it can even seem overwhelming. That is when a professional money manager can help. Money managers can design an in-depth budget to get you back on track towards your financial goals.  

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.

Ascend Investment Partners is not a legal or tax advisor. You should consult with your attorney, accountant and/or estate planner before taking any action.    Ascend Investment Partners did not assist in the preparation of this report, and its accuracy and completeness are not guaranteed. The opinions expressed in this report are those of the author(s) and are not necessarily those of Ascend Investment Partners or its affiliates. The material has been prepared or is distributed solely for information purposes and is not a solicitation or an offer to buy any security or instrument or to participate in any trading strategy   Services offered through Kesler, Norman & Wride, LLC dba Ascend Investment Partners, a Registered Investment Advisor. This message and any attachments contain information which may be confidential and/or privileged and is intended for use only by the addressee(s) named on this transmission. If you are not the intended recipient, or the employee or agent responsible for delivering the message to the intended recipient, you are notified that any review, copying, distribution or use of this transmission is strictly prohibited. If you have received this transmission in error, please (i) notify the sender immediately by e-mail or by telephone and (ii) destroy all copies of this message.  If you do not wish to receive marketing emails from this sender, please send an email to garrett@ascendinvestment.com    Please note that trading instructions through email, fax or voicemail will not be taken. 

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