How to Create a Budget for the New Year in 2024

The best way to take control of your finances is to create a budget. A budget is a simple tool that shows you the money going in and out of your household. It will show you if you are spending more or less than you can afford. As the new year is just around the corner, creating a budget for the new year is a great way to stay on top of your finances.

A budget will show you what you can afford to spend every month and give you an idea of how much you can start putting toward your future goals. If you are overspending, it will help you find areas in your expenses category that you can cut back on or cut out completely to live within your means.

So, if want to create a budget because you are overspending, looking for ways to save money every month, or you wish to pay off your debt fast, this article will show you how to create a budget for the new year so you can stay on top of your finances.

#1 Gather all your financial information

The first step to creating a new year’s budget is gathering all your financial information. Financial information includes sources of your income and expenses for at least the last month. You will need all the documents showing your monthly income and expenses.

For example, your pay slips, bank and credit card statements, utility bills, and receipts will show your income and expenses.

If you cannot gather all your financial information, especially regarding your expenses, you will need to figure out the monthly costs you may incur. But once you create a budget, you will have all the information about all your monthly expenses. Based on this information, you can create your budget for the next month and beyond.

#2 Choose your budgeting tools

Once you have gathered documents regarding your financial information, you will need a budgeting tool to determine exactly how much you earn and what you spend every month and set up your budget.

You can use an Excel spreadsheet, a budgeting app, a mobile app, budgeting software, or just pen and paper to create your budget.

You will also need a budgeting tool to track your monthly spending to see whether you are sticking to your budget.

#3 Calculate your income

Work out exactly how much money you earn in a month. Your income includes:

Your salary from an employer.
Income from a side job.
Benefits payments.
Other sources of income.

Use your pay slips and bank statements to calculate your income. List all of the sources of personal income you earn in a month.

The sources of your personal income will depend on your situation. You will need to add these sources to figure out your total monthly income.

If you get paid the same amount every month, it is easy to calculate your monthly income. But if you get paid weekly or bi-weekly and earn the same amount each week or every two weeks, then you will need to multiply your income weekly or bi-weekly by 52 or 26 and then divide this number by 12 to get your monthly income.

If your income varies each pay period, you will need to enter your variable weekly, bi-weekly, or monthly income in the income column on your budget. Then, it would help if you worked out your monthly expenses based on your variable income.

#4 Calculate your expenses

Once you have calculated your monthly income, next, you need to work out your monthly expenses. Look at your bank statements, utility bills, receipts, etc. financial documents to find exactly how much you spend each month.

Work out what you spend every month, such as a mortgage, rent, groceries, utility bills, childcare, tuition fees, eating out, entertainment, travel, personal savings, credit card payments, loan repayments, and so on.

Make a list of every single expense to determine the exact amounts you spend each month. It would help if you calculated occasional expenses such as clothing, gifts, and vacations too.

To calculate one-off expenses, such as house insurance, car insurance, and property taxes, you will need to find out how much money you spent the previous year for each of these expenses.

Then divide that amount by 12 to come up with a monthly amount that you need to enter in the expenses category of your monthly budget to pay the annual bill. You can put the monthly amount for each one-off spending into a savings account. You can even keep it in an envelope or jar. Just make sure that you only spend it on something else.

#5 Set up your budget

Now that you have calculated your monthly income and expenses, you need to enter the information regarding your monthly income in your income column on your budget. Then enter the information regarding your projected expenses in the expenses category of your budget.

Make a list of every single expense. Allocate an amount for every expense in the expenses category based on your past spending habits.

Your budget should include an expense line for each of your financial goals. How much you can allocate to each goal depends on your financial goals.

Once you have decided how much you could allocate to your financial goals, you need to determine an amount for each goal and save that amount every month. You should allocate at least 20% of your income to your savings goals.

You need to add all these expenses to figure out your monthly expenses.

#6 Figure out your totals

When you have added up all of your monthly income and expenses, subtract your total monthly expenses from your monthly net income. If your expenses exceed your income, you have a negative balance.

If you have a negative total, you spend more than you earn. If you want to live within your means, you need to find out what expenses you can cut from your outgoings so that your expenses match your income.

Once you have worked out how to reduce your spending and your expenses match your income, you can create your budget again.

If the money in your household is more than your outgoings per month, you spend less than you earn. In other words, you have a surplus. You can direct the extra money to your savings account, emergency fund, or debt repayments or invest that extra money, depending on your financial goals.

Even if you have a “budget surplus,” it is still worth seeing if you could cut back on nonessentials from your expenses category to save more money. Consider cutting out some expenses temporarily to save more money.

#7 Cut spending

If you have a negative balance, find out what expenses you can cut from your outgoings so that your expenses match your income. Here are a few ideas on how to cut spending to live within your means:

If you smoke and drink, you could save monthly money by quitting your vices.
Please make a list when you go to a store for grocery or food shopping and stick to it to cut down on food bills.
If you plan for meals based on what is on sale at your local grocery store, you can save some money.
Cut back on eating out to save money.
You can watch a movie at home with your family or friends instead of going to the theater.
You can pack your lunch instead of eating out at a restaurant to save a lot of money every month.
Make coffee at home instead of buying that takeout coffee daily to live within your means, or you can put that savings toward your savings category, depending on your money situation.
You can cancel unused subscriptions like your gym membership, cut the cable or downgrade your TV package, and downgrade your data plan and cell phone plan to save a lot of money every month without affecting you too much your lifestyle.
Shop around for your monthly payments for utilities such as gas, electricity, internet, phone, insurance, etc., to compare prices from other companies and find cheaper deals and packages to reduce your monthly outgoings.
When shopping online or in-store, take advantage of cashback apps, websites, coupons, and discount codes to save money on food shopping and other purchases.

Identify expenses that you can cut without impacting too much on your lifestyle.

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#8 Monitor your budget

Once you have created a budget for the new year, it is essential to monitor your budget to see if you are overspending or spending less. By tracking your spending, you can find out if you spent more money on an item than you initially allocated. You can cut down on another thing or more to compensate for the extra expense.

If you spent less in a category, you can put the savings towards your savings category or use it to back up the extra expense in another category. You can stick to your budget and stop overspending by tracking your spending.

#9 Adjust your budget

Make sure to check your budget every month and adjust your budget as and when necessary. For example, if your income or expenses go down, you must now decide where that money needs to go. In that case, you need to adjust your budget.

For example, you will need to change your budget whether you want to save the excess money to boost your emergency savings fund, pay off debt fast, or achieve any other goal.

If you want to make a large purchase or put extra money into savings, you must adjust your budget for the upcoming month/s. Besides, the costs of some things will go up yearly, so you will need to change your budget to ensure you are living within your means.

You may need to update your budget in case of a change in your income and expenses due to circumstances such as:

If you get a promotion or a new job
If you lose your job or are made redundant
If you buy a house
If you get married
If you have a baby

A change in your income or expenses will affect your budget, so you will need to figure out where to make changes. It will be easy to stick to your budget and achieve your budgeting goals if you adjust your budget.

More Budget Ideas for the New Year?

Creating a budget for the new year will help you live within your means, save money, get out of debt, or achieve other financial goals, depending on your situation. A realistic budget can help you feel in more control of your personal finances.

If you have more budget ideas for the new year, let us know in the comments.

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