Happy New Year! With our first Moneyline blog of 2022, we want to help you start the year off right by discussing your yearly budget. At the beginning of the year, it's good to step back and assess what financial needs you may have on the horizon. This yearly assessment is different than your more frequent weekly or monthly finance check-ins, because during this time, you are able to establish your long-term financial goals. In this blog, we will list three tips to consider to help get your finances on track this year.
Tip 1: Update Your Yearly Budget
Start by documenting your household income and expenses. A lot may have changed for you financially since you last updated your budget. You could have moved, had or taken on a new dependent, or became an empty-nester. Additionally, January is the time that many companies begin their open enrollments for health and dental/vision care, 401Ks, and retirement benefits, which you may be buying into. This review period is also an opportune time for you to factor in any areas that you will not be spending as much money on during the upcoming year, such as childcare, if your children are back in school full time.
The Balance says you should be reviewing your budget at least once a year, so you can establish how much you have and how much you will need to cover your expenses. By doing a yearly review of your budget, you can also create and/or reevaluate your general financial goals. If you have never established any financial goals for yourself, just think of them as what you hope to get out of your money each year. These goals could be as simple as paying your bills on time each month, or as intricate as creating a savings plan to help buy your dream home. While financial goals can be different depending on the person, no matter what they are, they will hopefully lead to the same outcome: helping you get a good picture of how you’re spending your money.
Your yearly budget review should compare what you hoped to spend, and how much you actually spent during the previous year. By looking at all of the specific places where you spent your money, you can see where you spent more on than you might have intended, and/or if there are any areas of your budget that you can cut out. You should also use your annual budget audit as an opportunity to assess and allocate your finances for any big events you might have coming up, such as a wedding, home renovations, or if you’re planning to expand your family.
Tip 2: Start the Year Off Right with Savings
Now that you have reviewed your budget, looked for ways to cut out the things you don’t need, and have a better understanding of your new financial priorities, you can start thinking about a savings plan. By starting to save at the beginning of the year, you are creating a habit for yourself, so that once you start putting your money aside, you won’t stop.
Some helpful advice to get started on a savings account/emergency fund is:
- Figure out a dollar amount or percentage of your income each month you can afford to put into savings.
- Take that amount from your pay each month and either directly deposit it into your savings account, or put it out of sight so you won’t be tempted to dip into it.
- Don’t view these funds as extra money lying around that can be used for anything.
- Only dip into your savings fund if it is a real emergency, or for the reason you started the savings account in the first place.
Starting off the year with saving will hopefully set you on the right path to being secure in your finances during 2022.
Tip 3: Build a Suite of Personal Finance Resources to Reference in a Pinch
Our final tip is to make sure that you have ready access to financial information that will help you when you may need it most. You should have a set collection of resources that will help you answer any personal finance questions you may have quickly and easily. In the Education section of PFCU’s website, you can find a treasure trove of resources to help answer many of your most pressing financial questions.
Some of our offerings include:
- Credit reports and counseling to help make sure your credit is in a good place and/or how you can get it there.
- Our nonprofit partner Clarifi’s information library that can assist you on your path to creating a healthy financial life.
- Calculators that you can use to accurately calculate your taxes, mortgage and home loans, investment and retirement, etc.
- Webinars you can either attend or watch a recording of, which offer in-depth information about various financial topics, such as: saving and planning for your children, money management, and paying for college.
- Our Moneyline blog, which offers articles that can give you advice on a number of topics, including: budgeting for a wedding, paying for college, and how to not break the bank on your Thanksgiving meal.
- These resources could also be physical files that you have printed out and stored away somewhere to be taken out when you may need them.
By using these tips, we hope we are helping you set and continue good financial habits that will see you through all aspects of your life. Here at PFCU, we want to wish all of our members a safe and healthy start to the new year. We look forward to continuing to hand out more financial advice to you throughout the rest of 2022.
Erin Ellis
Accredited Financial Counselor ®
Philadelphia Federal Credit Union
eellis@PFCU.COM