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How to Make a Brand New Budget That Actually Works For You

Amelia McBain  |  November 9, 2023

Take a deep breath and get ready to dive back in: Let's create a budget to keep you on track this year.

Another New Year is almost upon us, and for many of us, this means new financial goals that we want to complete, and possibly a brand new budget. Maybe you want to spend less eating out, save more, pay off a debt, or in general, be smarter about money.

We know. Making these sorts of changes can be really hard. You can identify what you want to do pretty easily, but the harder part is identifying how to do it. Bottom line: You need a budget. And we’re here to help you fashion one that actually works.  

Starting a budget can be daunting. Maybe you don’t want to know exactly how much you spend on Ubers or coffees or whatever—ignorance can be bliss. “It’s a lot easier to bury your head in the sand around your spending habits than it is to address them head-on,” said Douglas Boneparth, president of Bone Fide Wealth. However, ignorance can also hurt your long-term financial goals.

Think about what you want to do financially over the next month, or three months, or year.

So take a deep breath, and dive back in by creating (or if you already have one re-evaluating) a budget to keep you on track this year.

Figure Out What You Want (Knowing You Can’t Have Everything)

Think about what you want to do financially over the next month, or three months, or year.

Do you want to bulk up your emergency fund? Do you want to pay off your student debt? Maybe you just want to put a little more in savings. No matter what your goals are, they should be specific (are you aiming to save an extra $5 a week, an extra $10?), they should have time frames attached to them (do you want to have that cushion completed by mid-year or year-end), and you should know where they rank on your list of priorities (is the emergency cushion ahead of debt repayment?)  And—yes—they should be in writing.

You also have to be realistic.

“We tend to write the budget we wish we could achieve,” said Brynne Conroy, owner of Femme Frugality and the author of “The Feminist Financial Handbook.”  Instead, make goals that you’re fairly certain you can achieve. If you are consistently topping them, you can tweak them upward later in the year.

Track Your Finances To Keep Yourself Honest

It’s very easy to fudge the amount you’re spending or saving when you’re not documenting what you’re doing. “There’s budgeting and then there’s cash flow, and the two need to go hand in hand,” says Boneparth. “Budgeting is what you hope you will spend throughout any given month or year; cash flow, on the other hand, is what you actually spend.”  

There are online tools that can help with tracking: YouNeedABudget (YNAB), Tiller and others. But make sure you’re also keeping track of where your cash is going and the money that flows through tools like Venmo.   

How long do you need to track? If you’re starting a brand-new budget, Boneparth recommends compiling six months to a year of retroactive data to get a real understanding of spending patterns. If that’s too much for you, even a single month of real-time tracking can be eye-opening (and occasionally scary).

Identifying Areas You Can Utilize For Your Goals

Tracking gives us a clear line of sight to our expenditures and information we can use to make changes.  If we see we’re spending more on eating out or clothes or entertainment or whatever than we’d like, we can set a goal for the next month to cut it back by 10% or 15%, for example. This is where those aforementioned goals come in. Is that gym membership you’re not really using worth missing out on paying off your credit card debt? If not, identify the amount of money you can put toward your goals.

Automate to Memorialize The Changes

Once you’ve freed up money that you’ll no longer going to spend on particular things, set up a system that will automatically move them into the place—savings, typically—where they can help you achieve your goals. Conroy also recommends an automatic transfer on payday. “It’s not something you have to think about,” she says.

Revisit and Tweak

Once you’ve identified areas you’d like to cut and goals you’d like to put that money into, it’s time to actually put your budget into writing. Use the data you’ve acquired to come up with numbers that make sense for you.

MORE: We’ve made a budget template you can copy and customize to your heart’s content.

“Whatever method of budget, one thing I really encourage people to do is to budget liberally and spend conservatively,” said Conroy. That means budget more money than you think you need and find ways to spend less than you normally would. “That way, you’ll always have a surplus at the end of the month.”

“You are now in full control on how you’re spending your money and how you’re saving your money,” said Boneparth. “There’s nothing more powerful than that.”

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