* Don’t forget about debts. Many people plan a budget more to get out of debt than to save for a rainy day. When establishing a budget for the year ahead, calculate how much debt you’re currently carrying. Though you can do so if you prefer, it’s best to exclude existing installment loans like a mortgage or a car note from your list of debts. Though those can be considered money you owe, they are more in line with the monthly expenses you need to live than credit card debts you simply need to get rid of. If your debt is considerable or even small, see if there is anything you can remove from your list of monthly expenses (i.e., cable television or streaming video subscription) so you can devote that money to eliminating your debt. In addition, those with considerable debt should prioritize ending that debt over projects you want to tackle that aren’t exactly necessities. For example, if your kitchen is outdated but still safe and functional, postpone the kitchen remodeluntil you have eliminated your debt.
* Decide where you can cut costs. Chances are you’re establishing a budget because you have a specific financial goal in mind or because you examined last year’s financial statements and realized you fell short of your savings goals. So you likely know you need to cut some costs, and part of establishing a budget is deciding which costs you can cut. Some of the more common ways people cut costs at the dawn of a new year includes deciding to dine out less, canceling a cable television subscription or removing premium channels from their package, driving less to save money on fuel and forgoing store-bought coffee for java they make at home. Each of these budget cuts can lead to substantial savings over a full year, and none of them are life-altering to the point of lowering a person’s quality of life.