With January 1 right around the corner, the end of the year is a prime time for many people to start thinking about change. New Year’s resolutions often focus on doing something better, so establishing good financial habits and a reliable budget is a great place to start. 
Pablo Oliva, a wealth advisor with Northsight Wealth Management, LLC, says if you aren’t happy with the way your finances are going, the new year is a good time to take stock of your spending habits, and also to set some new habits in motion. “Budgeting is just a way to visualize how much money you have coming in and how much you have going out,” he says.
If the holidays drained your bank account and your budget more than you anticipated, start the new year with a different plan. “Cut out some unnecessary expenses,” Oliva advises while also using different techniques for savings. If you spent too much over the holidays, open up a separate account in January that’s devoted solely to holiday expenses. “Put in 50 or 100 dollars a month to start to save,” he says. “And then you aren’t scrambling.”
And to give your overall budget efforts a boost, use one of many budgeting tools or apps. Some tools can link to all your credit accounts and deliver a spending report that will show you where you have been spending your money. Is most of your available cash going to expenses you need to live or is it going to invisible costs like eating out?
As a professional, Oliva says he revisits his personal budget every six months or so. Without that check in, it’s easy to lose track of how you’re spending. To get started, find a budgeting tool, use a spreadsheet, or even grab a pad of paper and enter in all of your income from full-time work, side jobs, cash you receive after taxes, health care or insurances, and 401k or retirement savings have been deducted.
With that final amount, Oliva recommends dividing your available money using a 50/30/20 rule. Fifty percent is for your needs such as rent or mortgage, utilities, gas, or cell phone. The 30 percent is for wants such as a gym membership or subscriptions for streaming or music. Budget the final 20 percent is for debt and savings such as credit card debt, student loans, or an auto loan. “In general, for every one thousand after taxes, if you follow the 50/30/20 rule, no more than $300 of that amount goes to wants,” he says. If your needs amounts total more than 50 percent, you are living over your means and should look to reduce your expenses.
And as you look at the different percentages, remember that you should meet your mortgage payment before tackling something like a high credit card balance.
And before you really focus on your debt, you want to protect yourself from unexpected financial hiccups. Ideally, you want to have four to six months of basic needs costs in a savings account.
“It’s scary opening up about finances,” says Oliva, “particularly if your family or culture discourages it. But if your financial picture isn’t in a good spot and you don’t know how to fix it, it’s time to get some help.”
Taking control of your budget process takes work, but the benefits are worth it. Educate yourself or hire a professional–just start.
A legal disclosure from Northsight for this interview: Investment advisory services are offered through Northsight Wealth Management, LLC (NSMW), a Registered Investment Advisor. Northsight Wealth Management, LLC will only provide investment advisory services in jurisdictions where it is registered as an investment adviser or exempt from registration. Insurance products and services are offered and sold through individually licensed and appointed insurance agents. NSWM does not provide legal or tax advice.
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