Budget planning for the New Year
As we begin in 2021, there’s no better time to get your finances in order, starting by creating a budget.
The New Year is often associated with beginnings: new commitments, new resolutions, new opportunities. And as you begin writing 2021 on your (digital) checks, it’s the perfect time to begin creating a new budget.
Creating a formal budget can be far more helpful than spending your money spontaneously, especially if you incurred unexpected expenses in the previous year. For many, 2020 and the Covid-19 pandemic extracted a heavy human toll, impacting every aspect of our lives. Whether you incurred medical expenses, suffered setbacks in your professional life, took on loan debt, or saw your personal savings dwindle, making a budget can help you regain control of your financial life.
Making a budget — and sticking to it — is especially helpful for those who rely on credit cards to pay for everyday necessities, like food and utilities. The number is not modest, with more than one-third of Americans turning to plastic to pay their monthly food bills1. Making a budget can help curb your dependence on those plastic debt creators while curbing your spending habits.
There’s an app for that
Not sure how to start the budgeting process? Have no fear, budgeting apps are here. Whatever your smartphone OS, there are hundreds of apps that can help you develop, monitor, and assess your budget. Many of the best apps sync with your financial accounts, providing one-click (swipe, tap) transparency into your spending habits. And if you’re someone who is prone to tardiness when it comes to bill paying, choose an app that provides automatic reminders, which will help you avoid late fees.
Focus on your bottom-line
Review your spending habits often, assessing any areas where you are spending more than budgeted. Revise your budget if these are truly under-represented categories; otherwise, try to trim these expenditures, if possible. Additionally, consider whether there are areas where you are spending less than budgeted. If so, congratulations! But don’t stop there! Consider allocating the savings to an emergency fund or retirement account.
Creating a budget helps you take better control of your spending and gain insight into your monthly, seasonal, and annual cash flow. It’s a critical step to taking control of your financial life and achieving your financial goals.
This material is for general information only and is not intended to provide specific advice or recommendations for any individual. There is no assurance that the views or strategies discussed are suitable for all investors or will yield positive outcomes. Investing involves risks including possible loss of principal.
This material was prepared by LPL Financial.
Securities and advisory services offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. To the extent you are receiving investment advice from a separately registered independent investment advisor that is not an LPL Financial affiliate, please note LPL Financial makes no representation with respect to such an entity.