Five Budgeting Tips for 2016



The average debt-carrying household has more than $15,000 in outstanding credit card balances. That kind of debt places a significant strain on your finances, and can really hurt your credit score.


To avoid running up a big balance — or accumulating a bigger one, if you’re already behind on credit card payments — use the first few weeks of 2016 to create a well-thought-out budget.


Here’s how to get started.


  1. Have larger goals in mind

Most people don’t create budgets for their own sake. Instead, their monthly spending plans allow them to meet larger goals, including paying down debt, bolstering retirement savings or saving enough for a mortgage down payment.


Before you draw up your budget, think about your personal big-picture objectives. They should be as specific as possible. Detailed goals are much easier to track and measure than vague ones.


  1. Create spending categories

Apply the same level of detail to your budget’s spending categories, and go beyond simply differentiating between essential and nonessential expenses. Set aside money for your rent or mortgage, groceries, gas, and contributions to short- and long-term savings accounts. Then divide your nonessential spending into categories such as restaurant meals, trips to the movies and new clothes. This specificity will give you much better insight into your spending habits.


  1. Track your spending

Sorting your spending into smaller categories also makes it easier to track how much you’re shelling out each month — and the areas in which you need to spend less. Conversely, if your spending in a certain category is far below the upper limit that you’ve set, reduce the amount you budget for that category and reallocate those funds elsewhere, perhaps to your retirement savings.


  1. Review receipts and online statements

Make tracking your spending easy by keeping paper receipts or using online banking tools offered by financial institutions like Raccoon Valley Bank. Without them, it will be difficult to remember your last four weeks’ worth of spending. Receipts and statements also let you track your outgoing expenses based on various date ranges, which should give you better insight into your spending habits.

  1. Hold yourself accountable

All the time and effort you expend coming up with a budget will be wasted if you abandon it after only a few weeks. One of the best ways to stay on track is to regularly remind yourself of your larger financial goals.


Knowing what you’re working toward — be it debt elimination or saving for a summer trip — will keep you motivated, and will help pave the way for a financially secure 2016.


Tony Armstrong, NerdWallet

© Copyright 2015 NerdWallet, Inc. All Rights Reserved

We're Centered Around You