Financial Wellness Month – Budgeting for the Year
January is Financial Wellness Month, a time dedicated to building habits that promote financial stability and growth.
One of the foundational pillars of financial wellness is budgeting—a tool for managing money, controlling spending, and working toward financial goals.
It’s easy to overspend. A recent survey by MarketWatch Guides revealed that more than 66 percent of Americans live paycheck to paycheck. Nearly half even describe themselves as financially strained or “broke.” This highlights the importance of budgeting and planning to break the cycle and build financial stability.
Whether new to budgeting or looking to refine your approach, January is the perfect month to start fresh and set the tone for a prosperous year.
Understanding the Basics of Budgeting
Budgeting may sound intimidating, but at its core, it’s a simple process of planning how you’ll spend and save your money.
“A budget gives you a clear picture of your income, expenses, and how much you can allocate toward specific monthly goals. It’s essentially a roadmap for your finances, showing you where your money is going and helping you make informed decisions,” says Joseph Aspelund, Director of Insurance Sales & Asst. Branch Manager at David Lerner Associates, Inc.
The first step is to determine your total monthly income, including wages, freelance work, side gigs, or any other sources of revenue. Next, list all your monthly expenses—think rent or mortgage, utilities, groceries, transportation, and discretionary spending. Finally, subtract your expenses from your income to see what’s left. If you’re spending more than you’re earning, this is a clear sign to adjust your spending habits.
Setting Clear Financial Goals
Creating a budget is easier and more meaningful when you have clear financial goals. Goals can be short-term, such as saving for a vacation or paying off a credit card, or long-term, like building an emergency fund, saving for a down payment on a house, or investing for retirement. Defining your goals helps you prioritize your spending and guides how much you should save each month.
Start by writing down your goals and assigning a timeline to each one. For example, you might aim to save $1,000 for an emergency fund in the next six months or pay off a credit card by the end of the year. Having these objectives gives you something to work toward and keeps you motivated when sticking to your budget is challenging.
Choosing a Budgeting Method that Works for You
- 50/30/20 Rule: This method divides your income into three categories: 50 percent for needs, 30 percent for wants, and 20 percent for savings and debt repayment.
- Zero-Based Budget: With this method, every dollar is assigned a job, so your income minus your expenses equals zero. This approach ensures you know where each dollar is going.
- Envelope System: Popularized by financial experts, this method involves allocating cash to different enveloping spending categories. Once the envelope is empty, you stop spending in that category for the month.
Experiment with different methods to find one that fits your lifestyle and financial goals. The key is to choose a system that’s easy to stick with and allows you to feel in control of your finances.
Tracking and Adjusting Your Spending
Creating a budget is only the beginning; the next step is to track your spending and adjust as needed. Many people find it helpful to use budgeting apps or online tools, which make it easy to categorize expenses, monitor spending in real time, and analyze trends over time.
Apps like YNAB (You Need a Budget) and PocketGuard are popular choices that simplify tracking and give you valuable insights into your spending habits.
Review your spending at the end of each month and see if you stayed within your budget. Did you overspend in any categories? Are there areas where you could cut back? Adjusting your budget based on real-life spending allows you to stay flexible and adapt to unexpected expenses or changes in income.
Building an Emergency Fund for Financial Security
Budgeting isn’t just about covering monthly expenses; it’s also about planning for the unexpected. Life is unpredictable, and having an emergency fund can provide a financial cushion in case of unforeseen expenses, such as medical bills, car repairs, or job loss. Financial experts typically recommend saving three to six months’ worth of living expenses in an emergency fund.
To build this fund, set aside a small amount each month, even if it’s just $50. Over time, your emergency fund will grow, providing peace of mind and a sense of security. Make saving for emergencies a priority in your budget, and resist the urge to dip into this fund unless necessary.
Staying Accountable and Reviewing Your Budget Regularly
Staying accountable to your budget is crucial to your financial success. It’s easy to start the year strong, only to lose focus a few months in. Schedule a monthly “money date” with yourself or a trusted partner to review your budget, assess your progress, and make any necessary adjustments.
During these check-ins, celebrate small wins, like reaching a savings milestone or paying off a debt. Reflect on any challenges you faced and brainstorm solutions for the future. Remember, budgeting is a journey, and small setbacks are normal. What matters is that you stay committed and keep moving toward your goals.
To Your Financial Health in 2025
Budgeting is a powerful tool for achieving financial wellness. By creating a budget, setting clear goals, tracking your spending, and adjusting as needed, you can take control of your finances and build a more secure future. January is the perfect time to start fresh, so embrace Financial Wellness Month as an opportunity to strengthen your financial foundation.
Are you ready to take charge of your financial wellness this year? At David Lerner Associates, we’re here to help you understand budgeting, investing, and planning for your financial future. Visit our website to learn more about our services and explore resources toward financial success. Let’s make 2025 a year of smart money management and lasting financial health!
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.