As we step into this fresh calendar page, it’s time to talk about something we often overlook among our New Year’s resolutions: budgeting. That’s part of my favourite things to do while starting the new year but as well during summer for the rest of the year. After the holiday splurge, getting our finances in order can feel daunting. But fear not! I’m here to share some personal insights and practical tips on how to regain control of your finances and start the New Year on the right foot. Let’s dive into the world of post-holiday budgeting and financial planning. And if you didn’t read my resolutions of the year, I placed in my financial resolution and my action plan to achieve it: New Year’s resolutions: my personal roadmap to achieving them.
1- Assessing your financial situation
The first step is to assess the damage – and I mean that in the most positive way possible. Gather all your bank statements. It might be a bit scary, but knowing exactly where you stand is crucial. Then it’s time to analyse and filter with what was necessary (and among it, tag per category: grocery, rent, insurance, …), and what was unnecessary. Unnecessary doesn’t mean that it will be cut, but means that we don’t need it 100%. It can be done through the whole year or just couple of months, usually I am taking the last 3 months.
2- Creating a realistic budget
Next up, creating a realistic budget. Now, budgeting isn’t just about cutting costs; it’s about understanding your income and expenses and finding a balance. I use a simple spreadsheet to track my monthly income, fixed expenses (like rent, utilities, subscriptions), and variable expenses (like groceries, entertainment). The key here is honesty and realism. If you love your weekly takeout, factor it in – it’s all about balance! I think it’s important to have buffer on what is necessary, but as well planned according to what’s coming (holidays, moving, …), that’s the heart of financial planning.
3- Setting financial goals
Just as we set personal and professional goals, financial planning is equally important. It could be saving for a vacation, building an emergency fund, or paying off debt. I like to set both short-term and long-term goals. Remember, these should be Specific, Measurable, Achievable, Relevant, and Time-bound (SMART). If you need more guidance about this point, read my article Mastering the art of setting achievable yearly goals: a guide to stay motivated. Again, it all depends you goals, but achievable to not be frustrated.
4- Cutting unnecessary expenses
Post-holidays, it’s a good time to look at where you can trim the fat. Do you have subscriptions you no longer use? Are there cheaper alternatives for some of your regular expenses? Sometimes, small savings can add up to a significant amount. I also usually review my insurances, phone provider, … to re-negotiate contract, change for a better plan and save money.
5- The 50/30/20 rule
One of my favorite budgeting methods is the 50/30/20 rule – 50% of your income goes to needs, 30% to wants, and 20% to savings or paying off debt. It’s a simple yet effective way to allocate your finances. Keeping track of the finance in a notebook, app or excel sheet is important to have an overview of the needs and how to manage the expenses. For me that’s also the fair rate for each allocation. The “wants” part includes holidays, which is why that’s also high. Everything that is not used goes in the end of the month to savings.
6- Tracking your spending
For make it works, what’s important is keeping track of your spending. There are fantastic apps out there that link to your bank accounts and categorize your spending, or you can go old-school with a spending diary, I am personally using excel, the same sheet where I am setting my financial goal. Either way, being aware of where your money goes is a game-changer, and eyes-opener.
7- My advices for an effective financial planning
- Building an emergency fund: if the last couple of years have taught us anything, it’s that having an emergency fund is crucial. Start small if you need to, but start. Even a little cushion can provide peace of mind.
- Investing in your future: once you have your immediate finances under control, think about the future. This could mean starting a retirement fund, investing in stocks or mutual funds, or even investing in personal development, like education or skills training.
- Seeking professional advice: there’s no shame in seeking help. Financial advisors can offer valuable insights and help you create a plan tailored to your specific needs and goals. I personally as soon as I moved to Germany ask for help and it has been really beneficial.
Budgeting and financial planning post-holidays don’t have to be a chore. Think of it as a step towards financial freedom and peace of mind. With a bit of planning, discipline, and a positive attitude, you can make this year your most financially savvy year yet. Here’s to a prosperous and fulfilling New Year!
