By Anne Wittig, Budget Coach
As the new year approaches, so does hope for widespread vaccination. We also hope for both stability and the ability to make plans with a bit more confidence. The latter is particularly relevant for me as a budget coach, because budgets are plans. I have found challenges in my own budgeting this year. As with all other plans this year, my budget has more often felt like a prayer than a plan.
To prepare for 2021 New Year’s Budget Resolutions, I recommend going through the following list (in order, if circumstances allow, or just start with the one that stands out):
1. Gather 2020 data. Check how your income and expenses have been each month in 2020, and since March in particular.
2. Observe reasons for fluctuations in 2020 data (or variations from prior years’ “normal”). Note circumstances and events that caused any atypical fluctuations.
3. Create a guesstimate table for 2021. Based on the information gathered, create a table like the one below and fill in some educated guesstimates about monthly income and expenses (i.e. best, worst, and likely case estimates).
4. Prepare for plausible scenarios. This is where, if it hasn’t already, it may diverge significantly based on circumstances, but consider the following: “Based on where I am now, financially, how can I plan to use my income and expenses in preparation for the possibility that next year could be an absolute 2020 of a year?”
For example, I hope the pandemic improves, but fear that things may not get better at the rate that I’d prefer (right now, please!) I want to set whatever funds I can aside for any possible “lean” months that may come. Looking at it practically, I also reason that in my best case scenario, I want to be saving for travel, museums or amusement parks, or other intermingling opportunities that have been scarce in 2020. Saving for the future can be hard when the future seems bleak. Sometimes it helps to think of it not as “saving” but as purchasing a future experience.
I know it’s hard not to be able to spend as much in the present on those experiences now, and it will be tempting (for me, at least) to spend on those things as soon as it seems safe enough to do so, but holding off now (and as vaccinations are still beginning to roll out) will save lives. Say what you will about 2020 – it has certainly been unique, but it’s also the year that every one of us can be a superhero just by how we spend our days.