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The beginning of the new year gives you a great opportunity take a close look at your finances and create a budget that works for you. As you prepare your 2018 budget, follow these five tips to help you follow through and reach your goals.
If you made a budget for 2017, review it so you can find places where you succeeded and failed to meet your goals. Knowing what worked and didn’t work for you last year will help you create a useful budget for 2018.
When you make a budget, you need to know how much money you have to spend on certain expenses. Determine what expenses you cannot avoid, such as your mortgage and auto insurance, so you know how much you will spend on those items in 2018.
Having a baseline of essential expenses will make it easier for you to create a budget that meets your basic needs and gives you some wiggle room for saving.
You can’t make a successful budget until you determine how much money you’ll likely earn in 2018. Most people can do this by looking at their previous tax returns, which will show your household income. If you got a raise in 2017, then you’ll want to include that extra money in your budget.
Even if you don’t know exactly how much money you’ll earn in 2018, you can make educated guesses that work well enough for your budget. When in doubt, underestimate your income instead of overestimating it. The worst that can happen is you end up with some extra cash at the end of the year.
Setting realistic spending targets will make it easier for you to follow your budget and make adjustments during 2018. You need realistic targets, though, or you will get discouraged, which makes it more likely that you will abandon your budget mid-year.
It’s most important to set spending targets for things that you can control, such as:
Every budget needs goals that will help you stay on track. Determine what goals matter the most to you so you can dedicate money to meeting them. Some of the most important goals that you can choose include:
Creating a budget for the new year takes some time and effort. By the end of 2018, though, you’ll be glad that you made a budget that helped you reach your financial goals.