Are you planning to make any New Year’s resolutions once January rolls around?
The most popular resolutions for 2018 revolved around getting fit, falling in love and making better financial decisions, according to financial news site 24/7 Wall St. If improving your finances is on your to-do list, it’s a great time to start fresh, complete with new set of budgeting habits. In fact, even if you think you’ve got budgeting nailed down, there’s likely at least one thing you can improve on.
Take a look at 6 budget behaviors that you may want to reset in the new year.
1. Not keeping a budget at all
A budget can only work for you if you actually have one. According to a survey by Debt.com, 30 percent of Americans don’t keep a budget, even though 92 percent of people surveyed agreed that everyone needs one.
“A big budgeting mistake is not creating one,” says financial coach and author Karen Beth Ford.
Making a budget for the new year simply means adding up your monthly expenses, then subtracting the total from your monthly income. You can easily track spending through the Chime mobile banking app. You’ll even get an alert each time there’s a new debit transaction.
Making your first budget can help you get a better grip on where your money is going. Once you do that, you can begin fine-tuning where and how you spend. And when making your first budget, be thorough and include every expense.
“Another budgeting mistake is forgetting to put something in the budget,” Ford says.
2. Using the wrong budgeting system
There are lots of ways to keep a budget. You can write it out by hand, record your expenses in a spreadsheet, buy a fancy budgeting software program, keep a budget calendar, try the cash envelope system or use a free budgeting app. Each one has pros and cons but what matters most is finding a budgeting method that works for you.
If you’ve been using the same budget for a while, ask yourself if it’s still meeting your needs. If not, consider taking another budget system for a test drive in the new year. You may want to try more than one budgeting system. This way, you can learn what you like or don’t like about each one.
3. Ignoring lifestyle creep
Lifestyle creep can blow a big hole in your budget if you’re not paying attention. If you aren’t in the habit of checking your budget regularly, “review the past year’s budget and make sure it still fits with your current cash flow,” says Beverly Harzog, a consumer finance analyst and credit card expert at U.S. News & World Report.
Consider how big changes – such as a pay raise at work or a move to a more expensive neighborhood – have impacted how much money you have coming in and going out each month. And look at the smaller changes too. Something like switching to a more expensive shampoo brand can affect your spending and overall budget.
“Life circumstances sometimes change fast, so every quarter, review your budget and see if you can find any expenses you can eliminate or downsize,” Harzog says.
4. Setting unrealistic budget expectations
Not being realistic with your spending or your money goals can backfire, says Olga Kirshenbaum, financial coach and owner of Rags to Riches Consulting.
“Setting aggressive goals for paying down debt or building savings can leave you with less cash than you actually need to get by until the next paycheck,” Kirshenbaum says. “You’re going to feel like you’re failing by not meeting your expectations and needing to borrow from yourself to get by.”
If your expectations don’t line up with what you can actually achieve with your budget, you may just be setting yourself up for failure, Kirshenbaum says. She says that if you fail because your goals aren’t realistic, you may be more likely to abandon your budget altogether.
Review your goals for the past year to see how much progress you’ve made, then think about how you can shape them in the new year. Your financial goals should be a motivator to take action, not a source of stress.
5. Not building savings into your budget
Sometimes, life throws you a curveball and when that happens, your budget may need to roll with your punches. Not leaving room in your budget for the occasional blip is another bad habit to abandon in the new year.
“If your budget has no wiggle room, you’re going to be in deep trouble the first time your car breaks down or you have an unexpected medical bill,” says Sara Skirboll, shopping and trends expert at RetailMeNot.
Skirboll says there’s an easy solution: Add a line item for savings into your budget. You can simplify your saving efforts further by setting up an automatic transfer from checking to savings each payday to build your emergency cushion.
You can also set up automatic savings deposits with the Chime banking app. Each time you use your Chime Visa Debit card to make a purchase, the transaction is rounded up to the nearest dollar and the difference is transferred to your Chime savings account.
6. Missing your bill due dates
Paying your bills past the due date can hurt your budget if this triggers a late fee. Even worse, this can damage your credit score, especially if you’re paying credit cards or loans late.
“If you have a habit of being sloppy with credit card payments, then be sure you get a grip on this in the new year,” Harzog says.
When you’re paying on time each month, you can dodge costly late fees and keep your credit score intact. Harzog says a good credit score can help you rack up savings in the new year on loans, car insurance and health insurance, all of which can funnel money back into your budget.
Budgeting Practice Makes Perfect
Getting used to new budgeting habits isn’t always easy, especially if you’re making big changes. On average, it takes 66 days for a new habit to become fully formed. So, as you start working on new budget habits to ring in the new year, remember to give them time to sink in and become part of your normal budget routine.