New Year? Time For A New Budget!

Ah, January. Time to kick out that old year (and let's be honest, it was getting a little rusty and worn out) and bring in a shiny new one. It's a time for fresh starts, new goals, and more than a bit of optimism that this year, things will be better.

To help ensure things get better, at least financially, January is a good time to revisit your budget and make some tweaks.

Update your income figures

Most years, the tax withholding rates change slightly, so your take home pay may have changed. If you modified any of your job benefit options, such as changing insurance plans or changing the amount you contribute to a medical or dependent care FSA, those changes will affect your take home pay as well. Obviously any salary changes will be reflected too.

Revisit your budget assumptions

When you made your budget, you probably had to take a guess at some expenses that vary month to month. Things like grocery costs, auto-related expenses, and entertainment expenses can be hard to estimate if you aren't keeping track of them - and if you didn't have a budget before, you probably weren't. If you've been following a budget for a year now, you've likely been tracking your expenses with something like Mint.com. You've got a year of history that you can go back and check. Were your budget assumptions correct? Adjust as necessary.

My actual spending was remarkably close to my budgeted amounts. I was not over in any budget category and in a couple, I was significantly under my budget. For example, I had budgeted a monthly grocery expense of $1,000. Looking back over my 2015 costs, I actually averaged $800 per month. Likewise, I had budgeted $125 a month for gas for my car and I actually spent $62.  By adjusting these categories where I was significantly under budget, I've freed up another $400. I'm still being conservative and leaving some room in my figures, but not as much as I was.

Increase Savings

Hopefully, your comparison between what you budgeted and what you actually spent has made you realize you may have more room that you thought in your budget. If that's the case, increasing the amount you are putting away in savings is never a bad option

Identify New Goals

What are the goals you want to save for this year? A vacation? A bigger emergency fund? A home improvement project? Now's the time to start planning for those.

Identify Missed Areas

Did you have any big expense areas you forgot to include in your budget? Car repair, perhaps. Or clothing. Perhaps you want to add a line to your budget for gift expenses for all those birthdays and holidays throughout out the year. Now's the time to add those in.

Leave Some Wiggle Room

A budget that allocates every penny of income is worthless. You'll never be able to stick to it. Include a line in your budget for leftover funds, which will be the difference between your income and all your budget items. This is your "mad money" for each month. If you go over budget in one area or want to splurge a bit, this gives you an idea of how much you can afford without throwing your finances into chaos.

My Magical Budget Spreadsheet

Last year, when I got serious about budgeting, I made a very nice (in my opinion) spreadsheet for budgeting. I wrote about some of the neat features it has here. You can also download your own copy at that link. (I really like the goal planning section I made!)

So What Did I Change?

When I did my budget review, I added some line items that I left out of my budget last year (and I knew I left them out when I made it originally). I added a line for clothing. My daughter is growing like crazy and always seems to need new pants or shoes. I also added a line item for gifts. This isn't a big expense for me, except around Christmas, but I'd like to have funds set aside anyway. Other than adjusting my budget to more closely resemble my actual spending, that's about all the changes I needed to make.


What changes, if any, have you made to your budget for the new year?