January is often the month we take stock of our lives and set resolutions for the year ahead.
But it's all too easy to set grand and ambitious goals while you're on holiday and relaxing in your hammock!
Of course, once we slot back into our day to day lives, our resolutions can often fall to the wayside. Which is why I choose February as my month to review and revise my budget, make my resolutions and set my goals for the year ahead.
Why set budget resolutions in February?
Personally, I've found setting my resolutions in February means I'm far more likely to keep them. While I'm on holiday I'll start thinking about my goals for the new year, reflecting on where I think I might need to make changes.
Once I'm back into the swing of my normal, day to day routine, I can see what's not working and where I can make improvements.
Here are my top tips for setting realistic, achievable goals for your budget in February:
- Keep your goals realistic
- Review and revise
- Get a better deal
- Resist the 'inertia effect'
- Track your progress
- Use a budgeting tool
- Check in regularly
Keep your goals realistic
"I'm not going to buy ANY takeaway coffees this year!"
My vice is coffee. Yup, I love a decent flat white. I can even go through periods of buying one or more coffees a day. I know, I know...!
Of course, the impact on my budget is huge. While the price of a daily coffee might seem insignificant in the larger scheme of things, the cost over a year is huge – upwards of $1,500! 😲
So, if I want to save money on my coffee expenditure but still enjoy a coffee now and then, a more realistic goal for me would be:
"I'm going to limit myself to just TWO takeaway coffees a week."
That's actionable, achievable and has an immediately positive impact on my budget.
Review and revise
Before you plan your budget for the year ahead, you need to get a true picture of how much you’re spending on essentials (like rent, power and water) and non-essentials (streaming services, meal box subscriptions, gym memberships, entertainment). You might also be surprised by what’s slipped into your budget over the past year.
Last year, I was shocked to find that I had ended up with two streaming service subscriptions. Did I need both? No! So I cancelled one. That was an easy $200 saved straight away.
Review everything that you’ve been paying for over the last 12 months and decide if it’s still necessary. You could end up saving hundreds of dollars by simply culling some non-essential spending.
Get a better deal
Once you’ve worked out what stays in the budget for this year, use comparison sites to see if you can get a better deal on services such as power, internet, mobile and insurance. Don’t forget to shop around for better mortgage rates if you’re due to refix your mortgage soon.
Work out what’s important to you. Is the value of a new fridge or TV worth locking yourself into a 24mth contract? Or can the savings you make from using a different provider be put towards buying a new TV?
Take time to review the deals and make sure it’s working in your favour.
Resist the 'inertia effect'
If you do sign up for a special fixed-term contract or deal, set yourself a reminder to review your options at least a month before your contact expires. You might find at the end of your contract you get rolled over onto a much higher rate than what you initially signed up for.
It’s the ‘inertia effect’ – companies rely on you not changing providers once you’ve signed up because it’s too much effort to change.
Track your progress
One of my goals in 2020 was to reduce my spending on clothes and shoes. I set myself a budget, and then tracked how much I spent on clothes and shoes over the year.
As I started to track my spending, I realised I was becoming far more discerning about my purchases. I would ask myself three questions:
- Do I really need this?
- Do I have something similar already?
- Will I still love this item in 12 months’ time?
Essentially, I needed to know if I could justify spending money on that item. If my purchase didn’t stack up on those three questions, I put it back on the shelf.
Use a budgeting tool
Using a budgeting tool helps keep you focussed on your goals and gives you a chance to see how far you’ve come. It also keeps you accountable. It’s much harder to justify another coffee or outfit if you know exactly how much budget you’ve got left to spend! 😊☕👗
Your budgeting tool can be as simple or as complex as you like. You might prefer using spreadsheets and manually adding in all your data. Or you might want something more automated that does the heavy lifting for you. A budgeting tool like mybudgetpal can connect directly to your bank accounts and automatically sort your transactions into your budget categories. It means your budget stays up to date, so you always know where you’re at.
Check in regularly
Check in with your budget on a regular basis. It’s too easy to lose sight of your goals or feel like you’re not making any progress. Checking your budget regularly means you can see the small changes, and track the impact of those changes over time.
By the end of this year, you’ll have a good idea of how you’re tracking. You just might find February is your new resolution month too!
