NEW YEAR’S RESOLUTIONS: CREATING A BUDGET

Friday, January 04, 2019

One of the best ways you can start the New Year off right is by creating a budget. Whether you’re a college student or senior in high school, creating a budget allows you to plan for expenses and savings in the coming year. With a solid budget in place, you’ll be able to plan for a big purchase or save up for an upcoming milestone.

At American Savings Bank, we want you to go into the New Year feeling confident in your finances. Follow the below steps to prepare your 2019 budget. We’ll help you look at areas where you may be able to cut down expenses as well as guide you to prepare a fund for unexpected life changes.

DETERMINE YOUR INCOME
The first step in creating a budget is to determine your monthly income. This will include your wages after tax, or the actual amount being deposited into your account at each pay period. If you have a spouse, include his or her income as well. Start by looking at your job wages and include any extra income you know you will have as well. This could include an annual bonus from work or a cash birthday gift from a loved one. Once you know your monthly income, you’ll know how much money you have to allot towards your expenses.

EVALUATE YOUR UPCOMING EXPENSES
Sit down and total up all of your known expenses for the coming year. This could include your monthly rent or mortgage payments, car payments, cost of various insurances, and any loan payments you may have. Adding these known expenses gives you a great starting point for how much you will need to cover expenses each month.

But what about unknown expenses, such as your credit card bill? Gather every bank statement, credit card statement, and receipts for cash payments you have available from the previous year. You can use this information to determine just how much you spent on non-recurring expenses over the course of the previous year. Break down the large yearly number into an average monthly expense. You can then add this average non-recurring expense to your known expenses to create a fairly accurate monthly expense for the coming year.

CREATING A BUDGET BASED ON KNOWN CHANGES
Now that you’ve estimated your average expenses each month, consider any upcoming life changes that might affect your budget in the new year. For example, if you and your spouse are planning to start a family, you will need to factor the costs of doctors, medication, and baby supplies into your budget. Similarly, if you’re thinking of buying a house this year, include estimated down payment and mortgage costs.

While there are many changes that can negatively affect your budget, there are also changes that can make a positive impact on your income. Are you planning to take a new, higher-paying job this year? Perhaps you’re getting ready to accept a promotion or raise from your current employer. These changes will increase your total monthly income and give you more flexibility in budgeting.

FACTORING IN UNEXPECTED EXPENSES
Not all expenses are as easy to predict. Sometimes life throws us a curveball leaving us with unexpected expenses that can really hurt a budget. For example, if you get into a car accident and your vehicle is totaled, you will suddenly need to purchase a new car. Factoring unforeseen expenses into your budget can protect you financially should disaster strike.

The easiest way to protect yourself against unexpected major expenses is to build an emergency fund. You can route part of your income into a savings account. A savings account also allows you to earn interest on your emergency fund, so it can grow over time. Some banks, like ASB, offer a range of savings options for different types of savers. You can deposit a large sum of money and earn a higher interest rate right away or simply open a basic account.

CAN YOU CUT SPENDING?
Now that you have a basic budget figured out, you can refine it even further for the New Year. Look at the expenses you’ve included for the budget. Are there any recurring expenses that can be cut down? What about non-recurring expenses, such as dining out? You may be able to scale back your monthly expenses with a few small changes. If you have a lot of monthly payments for various loans, you might consider consolidating those debts into one personal loan.

NEW YEAR, NEW YOU
Creating a budget is one of the best resolutions you can have to set yourself up for financial success in 2019. Need some help? Stop by an ASB branch near you to speak with our friendly, knowledgeable team.

Media Contact

Andrea Lum
Phone: (808) 539-7907
Email: alum@asbhawaii.com

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