As with every New Year’s Celebration, promises of more frequent exercise routines, healthier eating habits, and other self-care goals abound. While New Year’s resolutions are often based upon personal health goals, it may be beneficial to include healthier financial habits in your list of 2020 improvements.
While physical health is important, finances can often be a stressful topic that may weigh on your mental and emotional well-being. Setting goals and over-arching budgeting tasks such as categorizing “Needs vs. Wants” and saving room for emergencies can do wonders in alleviating your financial stressors as we enter the new decade!
Short-Term vs. Long-Term Goals
Looking at the entirety of 2020 may be very overwhelming when creating a financial plan, so you should break up your time into reasonable segments. These segments may be weekly, bi-weekly, monthly, etc. If you tend to be a more short-term thinker, it may be more sensible to segment your budget on a weekly basis. If you like to think ahead and are constantly pondering the future, you may be more successful in budgeting your spending on a monthly basis. While you may have a reasonably consistent routine, keep in mind that your budget may need to adapt based on particular months or seasons. For example, you may need to be more sparing during the holiday season in order to afford additional items such as gifts, decorations, or even snow tires and car maintenance if you live in harsher climates.
Classifying Needs vs. Wants in Your Budget
When approaching a budget or financial plan, you should try prioritizing your spending into “Needs vs. Wants.” Needs are things such as food (groceries), shelter (rent, mortgage), transportation (gas, public transportation fares, etc.) and other requirements to live a safe and stable lifestyle. Needs are indispensable.
Wants differ in that you can cut back on them without affecting your ability to survive. These purchases may include things such as personal beauty services, going out to eat, ordering takeout, booking trips, shopping and more. Take a hard look at what you’re spending on your wants and needs and set goals to cut back where you could be saving. If you end up having the means to do so, set aside a portion of your budget for “treating yourself” and making space for things that help you thrive rather than just survive.
Life is Imperfect
When budgeting, it is easy to ignore the simple fact that life is not perfect. Budgets that do not leave room for mistakes are not realistic. Cars breakdown, people become ill, items get stolen. Allotting a cushion of money for mishaps or emergencies is an important budgeting goal you should consider. The costs of these mishaps can range from $50 for a cracked phone screen, to thousands of dollars in the event of more serious emergencies such as vehicle crashes or sudden medical bills. Additionally, the amount of insurance coverage you have (car, health, phone, etc.) can also play a significant role in how much money you set aside. Try analyzing risk based upon your own lifestyle and set aside a sum of money that you deem reasonable for you.
If you’re ready to set a realistic budget and stick to it for 2020, we have the financial products, services and guidance to help. Contact Premier Source Federal Credit Union today to get started!