Was 2017 the year that you were supposed to get on a Budget, pay off debt and fill up your emergency fund with 3-6 months of expenses? How did it go? If you’re like the majority of people, you failed miserably at your New Year’s Resolutions and abandoned them by February.

On January 1st, you probably felt very ambitious, but it doesn’t take long for that ambition to wear off once the bills keep coming in and Murphy’s Law comes knocking at your door (or just bursting down your door without even knocking).

Over the years, New Year’s Resolutions have acquired a bad rap, and for multiple reasons. This is mainly due to the low success rates, lack of actual plans to reach those goals, or unrealistic expectations. Some will say that you shouldn’t need the new year to try to change and that you should be able to enact change at any time. I don’t agree with that and I applaud anyone who has the ambition to improve themselves or their situation, no matter what time of year it is or if it’s cliché!

If your resolutions often include Money, then this year we want you to finally succeed in reaching your financial goals! Saving money is one of the more popular New Year’s Resolutions, but like most resolutions, more than 90% fail to reach their money goals. We don’t like those numbers! So, we’re going to give you some tips on setting up a budget that you will actually be able to stick with throughout 2018.

1. Set Realistic Expectations – This is one of the biggest reasons that resolutions fail, and you don’t want to fall into this trap when it comes to your current situation and your goals. If you blindly set a goal that you will put $5,000 into your savings account by April even though you’re still swamped in debt, then there’s a high probability that you will fail, become discouraged and give up your financial goals altogether. You do not want to overwhelm yourself and you must understand that financial goals do not come quickly; it will take a lot of time and dedication to get to where you want to be.

Start reading financial success stories of others. If you read enough, you will find a family with a situation similar to yours and you can learn from what they did. These might help you to set up your own expectations. But be careful, some people get their stories posted because they go very extreme into cutting out debt and saving more money. Have a realistic understanding of what you are willing to give up in order to cut costs. It’s ok if you can’t cancel your $150 cell phone bill like the other family did. Just make sure you include it in your budget and know that’s $150 less that you will be able to save each month.

2. Research Previous Spending – You can’t set up a successful budget if you have no idea where all your money has been going. You must understand how you have been spending your money in order to figure out ways to spend less and cut expenses.

The best way to do this is to create a spreadsheet. Create a column for each month, going back 3-5 months. Each row will be a specific category, such as food, mortgage, entertainment, bills, restaurants, etc. Then go through your bank statements and add up each category. If you’re unsure what a transaction was for, put it in a miscellaneous category.

For many families, this will be an eye-opener as they may have had no idea how much was spent in restaurants, or just having fun. This exercise will help you understand where your money is going and to find clear ways where you can cut back and save.

3. Create a Budget “Rough Draft” – After you’ve analyzed your spending from the past 3 to 5 months, you’re ready to start putting together a budget. It will take some tinkering with the budget a few times until you come up with a good-looking budget, so, for now, you’re going to make your best estimates allocating money.

Start by writing down all of your income that you bring in each month. Next, write down each of your bills, any monthly debt payments, and other necessary expenses that you must pay each month. For now, write down your minimum payments on any credit cards or other debt. Finally, create a set of categories and estimate the monthly expenses. Categories in my budget include food, transportation, entertainment, clothes/gifts, and medical. But you can create categories as you need them.

At this point, try to calculate how much to put into each category based on the lowest amount you believe you can get by with based on previous spending and not by how much you have left as you subtract from your income. Don’t get excited if you still have $300 left and think you can put it into your clothing budget!

4. Create a Plan for Debt Repayment and Savings – After you’ve created a budget that you’re happy with, hopefully, you have some income left over after your expenses. With this extra income, you can make a plan for repaying debt or saving money.

If you have zero savings, focus on saving up $1,000 for an emergency fund. While you are saving for your emergency fund, continue paying the minimum on your debt. Creating this emergency fund is a very important step in making sure you can stick to your budget throughout the year! If you already have $1,000 in savings, or after you save this up, you can send all of your extra money towards debt repayment.

5. Track Spending – Each time you whip out that debit card, make sure you keep track by writing it down. Categorize the amount spent and make sure you subtract it from your budget to know how much you have left to spend. Do your best to stay within your budget for each category. By tracking your spending, you won’t have any surprises when you look at your bank account later, you will be less likely to splurge, and it’ll help you to fine-tune your budget as you go.

6. Finalize Your Budget – Your budget will not be perfect the first time. If you tried as hard as you could but was unable to stay under budget for a category, then adjust your budget as you need to. Chances are you will find that you allocated too much to one category and not enough to another. So, after your first month, revisit your budget and make some adjustments that will work better for the next month.

Having the right mindset is important to any New Year’s Resolution, and especially with any financial goals. It will take sacrifice and hard work to stick to a budget and begin saving money. Think about all the reasons that you want to start a budget and save money. Having financial freedom should bring you extra happiness in your life. The budget’s purpose is not to prevent you from having any fun or to be too restrictive. A budget allows you to control your money, so try to get yourself in the right mindset about your money and your goals.

Follow these steps and create a budget that you will actually be able to stick with throughout all of 2018 and beyond. We hope that 2018 is the year that you finally make that big step towards financial freedom!

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