According to a survey by BMO Financial Group, 40% of Americans said they haven’t made New Year’s financial resolutions this year, and 68% said they didn’t have a written financial plan at any point this year.
However, setting a budget can be very helpful in managing your personal finances.
“Many people spend time making New Year’s resolutions,” says Camilla Elliott, a certified financial planner with Collective Wealth Partners. She says that while people often focus on achieving personal goals, “setting an annual budget allows you to focus on your financial goals and understand what you want to achieve financially in the year.” It will look like this.”
The first step is to figure out your income.
“Knowing your income is very important because it allows you to know exactly how much expense you have to bring in,” Elliott explained. “So typically for my clients, we get their pay stubs and look at their net play.”
Net salary refers to your gross salary after deductions such as taxes, withholdings, and employee benefits such as Social Security, Medicare, and health insurance.
“I look at it every month,” said Elliott, who is also a member of CNBC’s Financial Advisor Council.
“I usually take someone’s biweekly paycheck and multiply it by 26 and divide by 12. Or, if they get paid bimonthly, it’s 24 pay periods divided by 12,” she says. I did.
The second step is to calculate your expenses. They can often be classified into two types: fixed and variable.
“Fixed expenses are things like rent, mortgage, car payment, etc. that you know what they’re actually going to be and how you can plan accordingly,” Elliott says.
“Variable costs can be tricky because some can be controlled and others cannot,” she added.
“How much do you spend on groceries? How much do you spend on eating out and clothing? Averaging those things can help you get a really good idea of how your life is going month-to-month,” she says. explained.
The final step is to set goals.
The budget parameters recommended by many experts are the 50-30-20 budget. This means that 50% of his take-home pay goes towards his own needs, 30% towards his wishes, and 20% towards his future financial savings.
please look video Learn more about how to set an annual budget for the new year.
