Budgeting Strategies for 2013

Happy 2013!

While you’re working on your New Year’s resolutions, make some time to take a fresh look at your budget. Here are some real-world tips to help you get started.

Determine your monthly income

For most people, income isn’t one-dimensional. To find out how much money you have to work with every month, factor in your monthly salary (after taxes), interest you earn from a savings account, money from your parents or investments, and any other regular and reliable source of money. Do not factor in your line of credit, or any work or money source you plan to have in the future. Focus on what you have right now.

Track your purchases

Don’t start budgeting by making a list of stuff you want to buy. Instead, track the things you’re already buying and see how much you’re currently spending each month. If the total amount you’re spending is more than the amount of money you have coming in, it’s time to cut back.

Discover your priorities

Bills and living expenses come first. Everything else is secondary. No exceptions! This is the only way to avoid debt. You need to pay your rent and put food on the table, but you don’t have to go to a concert. Don’t panic: no one’s asking you to stay home every night. Just remember that fun isn’t the foundation of your budget.

Don’t ignore your splurges

Everyone splurges on something. Maybe it’s fancy coffee, craft beer or another pair of shoes you don’t technically need. You may like to think you’ll never splurge again, but don’t kid yourself. You’ll be much better off if you’re realistic about these purchases and include room for them in your budget. Splurge responsibly.

Leave some wiggle room

Include room for “miscellaneous expenses” in your budget, too. Even if you’re the most diligent person in the world, we guarantee you’ll have surprise expenses once in a while. Life happens. You may have to pay a parking ticket or a medical bill, and ideally, you shouldn’t have to dip into your savings for expenses like this.

Use credit cards wisely

Credit cards let you make purchases quickly and easily, but that convenience comes with a price. You’re more likely to make purchases without thinking them through. To avoid this, plan ahead for your credit card purchases to make sure you can pay them off each month. When you make your payments on time, you can also take full advantage of your rewards points.

There’s an app for that

Are you a smartphone user? Consider downloading a personal finance app to help you track your purchases and keep your finances organized. We really like Expenditure, SplashMoney, MoneyStrands and Adaptu Wallet. Play around with a few and see which one like best, then make a point to use it regularly. If you don’t have a smartphone, try downloading a free budgeting worksheet. You can also use Tropical Financial’s budgeting calculators.

Guest Blogger: Laura Edgar is a senior writer for NerdWallet.com, an unbiased financial comparison website.