If you're on a Galaxy Fold, consider unfolding your phone or viewing it in full screen to best optimize your experience.
by Maurie Backman | Published on Dec. 6, 2021
Many or all of the products here are from our partners that pay us a commission. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
Promo: If these signs apply to you, it's time to update your budget.
The start of a new year is a good time to map out some financial goals and see what it takes to get there. You may, for example, want to complete your emergency fund by socking away three months of living expenses in your savings account. Or, you may want to finish saving up money to purchase a home.
To increase your chances of meeting your financial goals, it'll help to stick to a budget. And if you already have one in place, you're off to a good start.
But sometimes, changes to your budget may be necessary. Here's how to know if you should tweak yours in the coming year.
It may be the case that your living costs have risen recently. A lot of people, for example, are spending more money these days on groceries and gas due to inflation. And those are increases your budget should reflect.
On the other hand, it may be the case that you've lowered some of your personal living costs. Perhaps you paid off your car, so you no longer have to factor in a monthly $300 auto loan payment. Or maybe you decided to downsize your living space, thereby shaving $200 a month off of your rent. These are all changes that should be accounted for in your budget, so if they apply to you, your budget needs a refresh.
Many people will be getting a raise once 2022 kicks off. And if you're not getting a raise at your main job, you may have plans to boost your income by picking up a side hustle.
Either way, that extra income should be reflected in your budget so you can best take advantage of it. If your earnings are increasing by $300, you may want to specifically allocate more money in your budget to your savings, IRA, or an existing loan you're trying to pay off.
Of course, it could also be that your earnings will be lower in 2022. If you're planning to switch from a full-time job to a part-time one, that's a change you'll need to account for. Similarly, if you've been getting burned out due to working a full-time job plus a side hustle, you may decide to drop your second gig for a while and recharge. But if that's the case, then you'll need to factor in that ensuing decline in earnings.
Spending a little time to adjust your new budget for 2022 could make it easier to follow and more useful. Comb through your expenses to see which are changing, and factor in any adjustments to your income, for better or for worse.
In fact, not only might it be appropriate to update your budget at the start of 2022, but you should plan to revisit it three or four months later to make sure it's really working for you. It may not be the most thrilling way to spend an evening, but it's a move that could really work to your financial benefit.
If you have credit card debt, transferring it to this top balance transfer card secures you a 0% intro APR into 2023! Plus, you’ll pay no annual fee. Those are just a few reasons why our experts rate this card as a top pick to help get control of your debt. Read The Ascent's full review for free and apply in just 2 minutes.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.