Easy Tips to Fix Your Finances and Build a Budget in 2024
2024 is a year filled with fresh opportunities to take control of your finances and build a budget that works for you! In a world where financial stability is crucial, it's essential to learn these practical tips to navigate the ever-changing economic landscape.
A Step-by-Step Guide
1. Make a list of your values
Write down what matters to you and put your values in order.
2. Set your goals
Write down your goals, and think about what you want to accomplish financially in the next three months, the next year, and the next three years.
3. Determine your income
Figure your available income (the amount of your take-home, or net, pay). Do not include overtime pay, because you shouldn’t rely on that as regular income.
4. Determine your expenses
Review your checkbook register, credit card statements, store receipts, and more. Where is your money really going? "Fixed expenses," such as a rent, auto, or student loan payments, are easy to determine. "Flexible expenses," such as food, clothing, and entertainment, vary from month to month. Don't forget about expenses, such as taxes or insurance, that are billed quarterly, semi-annually, or yearly.
Look into personal finance software programs that offer a budgeting feature to help you track these expenses.
5. Create your budget
Think of your budget as a “spending plan,” a way to be aware of how much money you have, where it needs to go, and how much, if any, is left over. Your budget should meet your "needs" first, then the “wants” that you can afford. Your expenses should be less than or equal to your total income.
If your income is not enough to cover your expenses, adjust your budget (and your spending!) by deciding which expenses can be reduced.
6. Pay yourself first!
Saving is a very important part of protecting yourself financially. Save as much as you can every month. Even a small amount can make a big difference if you keep it up. Check out our savings calculator to learn more.
7. Be careful with credit cards
Credit cards can be handy, but be sure that whatever you spend on your credit card, you'll have the funds to pay back at the end of the month.
8. Check back periodically
Be sure to review your budget regularly. Does the plan still meet your needs and help you achieve your goals? If not, make some adjustments or create a new budget that better meets your needs.
Start by taking a look at your paycheck. If taxes are withheld, subtract that amount from your total earnings. Do not subtract other amounts that may be withheld or automatically deducted, like health insurance or retirement contributions. Those will become part of your budget.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals. Let’s take a closer look at each category.
About half of your budget should go toward needs. These are expenses that must be met no matter what, such as:
- Utility bills
- Rent or mortgage payments
- Health care
If you can honestly say “I can’t live without it,” you have identified a need. Minimum required payments on a credit card or a loan also belong in this category.
You subscribe to a streaming service to watch your favourite show, not because you need the subscription to live. Wants are things you enjoy that you spend money on by choice, such as:
- Supplies for hobbies
- Restaurant meals
The remaining 20% of your budget should go toward the future. You may put money in an emergency fund, contribute to a retirement account, or save toward a down payment on a home. Paying down debt beyond the minimum payment amount belongs in this category, too.