New Year, New Financial Habits

January 3, 2025

By K-Staff

Insighter, Personal Finance

With the start of a new year, many of us set goals for improvement, whether by losing weight, developing personal skills, or by improving our financial situation. An important step toward realizing your financial goals is creating a realistic budget – a spending plan based on your expenses and income.

What steps do we need to take in creating a budget, though? Here is a quick summary to help you get started.

Sort out your income and expenses and use the 50/30/20 rule

Start by determining how much income you receive (or estimating if you don’t have a steady income stream), and organize your expenses into three categories: needs, wants, and savings. Tracking your spending over the course of a few months will give you a more accurate picture of your normal spending habits.

Needs are things you can’t do without – housing, basic utilities, transportation, groceries, insurance, child care, etc. You should commit 50% of your income to needs. Wants are less essential things – dining out, traveling, entertainment, etc. Leave 30% of your income for wants, and commit the remaining 20% to savings or paying off existing debts.

You can easily track your income and expenses with our Budget Tracker tool on MoneyEdu at kirtlandcu.org/fwc.

Avoid everyday spending traps

Your day-to-day spending decisions can accumulate in ways you may not expect. You can save money by keeping a close eye on these trouble areas:

Convenience eating: We all need food, but while getting food from restaurants is more convenient than cooking, that convenience comes with an added cost. Bringing food from home rather than going for takeout every day can save hundreds of dollars per month – even cutting back on dining out can go a long way.
Using debit/credit cards: Debit and credit cards are convenient ways to spend money – but studies have shown people generally spend less money when they pay with cash. Give yourself a per diem for daily spending and see if you notice a difference.
“Saving” with a sale: A sale that offers significant savings can be very tempting, but buying something you don’t need doesn’t save anything. Only shop when you need something, and save what you don’t spend.

Cut back on unnecessary expenses

Check your expenses once you’ve tabulated everything over the course of a few months on average, and cut out the items you don’t need:

Cancel recurring charges: It seems like every product or service is on a subscription model today, and there’s a reason for that – people sign up for them and forget about the payments! Regularly review your credit card and bank statements, and take action to unsubscribe from services you don’t use regularly. You’ll save money in the long run.
Shop around for entertainment options: Cable and satellite television can cost over $200 per month. Cutting the cord and using an antenna for network TV and streaming for other channels can save money compared to traditional TV packages.
Economical entertainment: Take advantage of free or discounted entertainment options in your local community, like parks, museums, and libraries.

MoneyEdu has online courses, articles, tools, and calculators to help you Live Confident with your finances! Click the button below to visit our Financial Wellness Center today!

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New Year, New Financial Habits

Sort out your income and expenses and use the 50/30/20 rule

Avoid everyday spending traps

Cut back on unnecessary expenses

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