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SALT LAKE CITY -- One of the most common New Year's resolutions is to get your finances in order. Sue Lister, the vice chair of financial literacy at the Utah Association of CPAs, gives us some simple steps for setting a budget.
- Start by setting a goal. Ask yourself what you would like to be different in your financial world a year from now?
- Next, create a plan for how you will accomplish your goal - a spending plan (the word "budget" is too negative and controlling).
- As you create this plan, you'll start by identifying how much money you have coming in each month. Then list your monthly expenditures.
- Now is the time to get clear on the difference between your needs and your wants. As you list your expenditures, prioritize them in the following order:
- Needs (food, shelter, transportation, clothing)
- Debts and/or legal obligations
- Savings
- Wants/entertainment NOTE: Be sure to factor into your plan the goal you set. If it's to pay down a debt, make sure you are setting money aside in your plan (budget) to cover this before you allocate money on entertainment or other wants.
- Track and compare your actual expenditures each week with what you planned to spend.
Remember that spending wisely is the key to success. Elevate your spending decisions to a conscious choice rather than buying on impulse. One way to do this is to ask yourself this question: "Am I giving up what I want most (the goal you just set) for what I want now?"
