How to Decide What Financially Matters in the New Year

One of the hardest challenges that many of us face is sticking to a budget. If you’ve ever created a budget before, you know all too well that after a few months we find ourselves abandoning them.

The key to a successful budget/spending plan is creating it so that it fits your financial priorities. Before you draw up your spending plan for the coming year, take a few minutes to stop and think about what’s important to you financially. Put together a budget based on what matters to you, and you will be more likely to stick with it.

what matters in the new year

Look at Your Own Values

Your first step is to figure out what you value. Be honest. Do you want to live debt free? Or are you content to slowly chip away at your debt and be more comfortable in every day life? Figure out what you really want from life right now, as well as what you want later on.

While you may have to make an effort to adjust your lifestyle and tailor it to your desires, your current budget is a step toward accomplishing your idea of financial peace. Really think about your own core values — forget about what others think you should be doing with your money — and figure out what success would look like for you.

Once you have established your values, you can begin thinking about how to use your financial resources in a way that will help you reach your goal. Only then can you start putting together a spending plan for the year that reflects your own lifestyle preferences.

What Do You Want Your Money to Accomplish?

Next, figure out what you want your money to accomplish. What do you want your money to do for you? Rather than thinking about what you can do for more money, figure out what you want your money to do for you, in terms of making your life comfortable, securing your future, and avoiding wasting your resources.

You don’t even have to itemize everything ahead of time. My spending plan is pretty simple. I know my priorities, and I make sure they are funded each month. Once all of the priorities are taken care of (usually through some automated process), I can use the rest of the money for other things. As long as the priorities are covered, I don’t particularly care what the rest of the money is used for.

Identify your most important financial goal for the year, whether it’s paying off credit card debt, saving up for a family vacation, or boosting your monthly retirement account contributions. Think about why this goal is important, and how you hope it will contribute to your financial success.

This exercise can be very motivating. It can help you internalize your financial goal, and provide you with a reason to stick to your budget later on, when things get hard.

Bottom Line

Creating a successful budget isn’t about going through the motions of filling out a form with your income and expenses listed. If you really want to make it work for you, it has to be about helping you work toward your long term financial goals.

What can you do in the coming year that will put on the right path to your desired financial future? Deciding what matters most to you financially in the new year is entirely dependent on figuring out what you want your future success to look like, and then acknowledging what you need to do now in order to make that happen.

Picture by *Sally M* via Flickr

About the Author

By , on Dec 24, 2012
Miranda
Miranda is a freelance writer and professional blogger, specializing in financial topics. She has written for a number of financial web sites, and her work has been linked to by many publications, online and off. Miranda's blog is Planting Money Seeds.

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{20 Comments}

  1. I do not budget every penny in to a category. I have $100.00 each week for groceries, gas, haircuts or whatever I want. If I blow 15.00 on lunch out with a friend then there is less for groceries or I may have to delay another purchase for a week. I try and keep any money left at the end of the week in an old wallet stuffed in an drawer. Then when I do want something instead of need something there is some guilt free cash waiting.

    I tried a budget where I had to consider where every single penny went and it was too much work and I was left feeling deprived and I was missing out on fun stuff in my life.

  2. David says:

    Hi Miranda,
    It is indeed essential to go over our values carefully. At the same time, we have to create our budget so we know how hard-earned money is spent.

  3. Lauren says:

    Good point on not needing to itemize everything on your budget. I think too many people think a budget means allocating X amount for every-little-thing. While it’s good to be aware of what you are spending your money on, you don’t have to “budget” for it all. I budget for what needs to get paid for on a weekly basis. I estimate how much the income will be and subtract the bills due that week and then use the “extra” to spend on anything else – but my “extra” is also how much I have for gas and groceries, too. Some weeks I have just enough for the gas and groceries and other weeks I have enough for much more (take-out, anyone?). Once I started that system, it’s been hard to see how I managed our money before that.

    • Miranda says:

      My “budget” strategy is to cover everything that is most important to me at the beginning of the month, including bills, groceries, charity, retirement contributions, short-term goals, and other items, and then we pretty much spend the rest until it’s gone. It’s not the most exact way to plan, but it makes sure the important things are covered, and then we can get whatever we want — as long as there is money for it.

  4. Such a timely post as we’re deciding our goals/resolutions for 2013!

  5. I agree, first things first figure out what you want, then develop your plan.

  6. Although we use a budget to document every penny we spend we will gather together next week to go over 2012. The reason is to see what we want in terms of goals for 2013 and to better understand our spending habits and where we need to improve. It’s an important step and certainly a budget will be part of our financial picture for many years to come. Cheers Mr.CBB

  7. Pauline says:

    It is so hard with marketing, advertising and peer pressure to really know what you need for yourself. Once you realize what really counts, it is easy to set up priorities. I have cut back about 30% of my budget just for things I thought I was enjoying or was purchasing to please others.

  8. CF says:

    We are pretty much sticking with the same budget that we made late 2012 after I got my current job. We do have a few financial goals but after buying the 2nd condo, I think we’re just going to go straight and narrow and focus of paying off our debts and saving saving saving. Pretty boring really! 🙂

  9. Usually when people talk about debt, they talk about paying it off it the shortest possible time by forgoing everything possible. I want to get out of debt, but not at the expense of my nieces not getting Chirstmas presents from us. Thanks for offering a differing viewpoint.

    • Miranda says:

      One of the things I find is that, often, when you try to make a huge change all at once, it can be counter-productive. Instead, it’s about making small changes, a little at a time. It’s more likely to stick, and you’re less likely to feel deprived.

  10. Andy says:

    Linking a budget creation to an overall goal set is absolutely key. A budget is just a tool in your overall financial journey, for which you must have a clear destination/goal. While it may feel nice to track your expenses/savings, it must be done with the end purpose in mind as you discuss. Too many people think that budgeting will get them out of a financial mess. It is a good start to know where you stand, but by no means a means to the end.

    • Miranda says:

      Too often, we just set up to track income and expenses, rather than pay attention to what we want as an end result. I think you’re right that budgeting is a good first step, but it’s not the only thing. You really have to look at what you want for the long haul.

  11. Thad P says:

    Finding a system that works for you and sticking with it is crucial. No real success otherwise!

  12. Every time I’ve looked at my values before making a purchase, I’ve made the correct choice. I can’t stress that enough.

  13. I agree with your sentiment about making goals for yourself. I have found setting goals to be the most important thing that drives me forward. It gives me focus and generates intensity when I have something hanging out there I want to achieve.

  14. I love your advice about the budget needing to be what works for you. I discovered this the hard way early on when I tried to create a budget that just wasn’t realistic and wasn’t really tailored to my needs.

    • Miranda says:

      Personal finance is, indeed, personal 🙂 You’re right that it’s harder to stay on track when you try what works for someone else, instead of what works for you.

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