Four Steps to Set Up Your 2021 Budget Plan

No matter what this year looked like, it is time to plan for your best financial year yet! Whether you are still employed, furloughed or laid off, starting your budget now for 2021 will set you up to make ends meet and possibly begin to save again.

Here are four steps to help you set up your 2021 budget plan.

1. The first step to make an easy to follow budget for 2021 is to know what your existing expenses actually look like. Determine what you spend monthly on necessities (such as rent, groceries and utilities) and luxuries (such as lattes, eating out and entertainment). Look through your bank statements and credit card bills from the past year to see what things actually cost. By figuring out the actual amounts you are spending, you can come up with concrete figures to allocate towards specific expenses. Moving into 2021, it will be important for you to continue tracking your expenses to alter your budget if needed for expenses. 

2. The next step is to identify your saving goals for the year. Maybe you want to set aside money for building an emergency fund or toward a home. No matter what you are saving towards, it is important to include them in your monthly budget. You need to calculate how much money you can save by looking at what is left from your monthly income after spending on necessities. Additionally, look at what luxuries you can eliminate or trim to help you meet your saving goals.

3. It is important to account for expenses that are not part of your monthly spending. While we have many recurring bills, we also have non-recurring bills that can throw a wrench in a budget. Annual payments (such as insurances, licenses and car registrations) should not come as a surprise. Be sure to account for these once a year costs as part of your monthly budget to avoid having to take out extra funds from your savings or other expenses. For example, if you know that your annual business license is $300, set aside $25 a month for it.

4. Lastly, choose budgeting principles that make sense for you. In a way, give every dollar a job but remember you do not have to allocate every bit of your paycheck to a tee. Do not put such tight restraints on your budget that it uses your whole paycheck. Once you determine how much you need to spend on necessities and savings, you can also decide how much money can be placed aside in a miscellaneous category. These miscellaneous expenses can go toward having to pay for extra groceries one month, an increase in a gas bill another month or a medical bill; just to list a few examples.

If a particular budgeting practice does not work for you, do not use it. There are various ways you can create, maintain and track your money. Looking ahead to 2021, invest in yourself. The best part of investing in yourself is that it does not have to cost money, just a bit of time. So take some time now to financially invest in yourself. Set financial goals, set up a monthly budget, invest your money, cut back on unnecessary expenses, look into increasing your income and utilize the various digital financial tools. Start fresh next year and actually follow your financial plan!