Out of all the New Year’s Resolutions one can make this year, none is as popular as the goal to save more. It’s been a tough couple of years since the start of the pandemic, and a savings account flush with cash could certainly solve most of life’s problems.

There’s only one roadblock. Saving money is a vague and directionless goal. How much do you want to save? When do you want to save it? And how are you going to find the money?

The answers can be found in a budget, but only if it’s realistic. So, how can you do that? Here are some tips to keep in mind.

1. Follow a Budgeting Method

For most people, setting limits on their spending can be challenging. If you’re unsure, go online to pick a structured approach to budgeting. You can find countless templates and strategies to help you.

One of the most popular budgeting styles is the 50-30-20 Budget. This spending plan breaks down your expenses into three categories — needs, wants, and savings — and assigns them a portion of your income. Needs should take 50% of your income, your wants 30%, and the last 20% go towards savings. 

These targets guide your spending, making sure you prioritize the right things with your budget. 

2. Look Back on Last Year’s Spending

A budget is only effective when it’s an accurate reflection of your spending. This can be harder than it seems once you get past the simple stuff like rent and insurance that stays the same each month. 

But not all spending is fixed like that. Some bills fluctuate, others only arrive once a year. Miscellaneous spending, on the other hand, isn’t even a regular feature of your budget.

To get a better grasp on these hard-to-anticipate expenses, review last year’s statements. Organize your spending by category and date so that you know how much to set aside in advance. 

3. Prioritize Your Needs

When money’s tight, you have to sacrifice some of your fun spending to make ends meet. However, there are some items in your budget you should never cut. 

Rent or mortgage payments, insurances, utilities, and groceries are non-negotiable essentials. You should also prioritize the minimum payments on your short-term personal loans, lines of credit, and credit cards. 

This goes for any existing loans you have out, and any new ones you add in the new year. Financial institutions such as MoneyKey expect their borrowers to pay their personal loans back on time, so it’s important you hit every due date. 

4. Work on Building an Emergency Fund

Life throws some sharp curveballs at you from time to time. Guessing when they’ll arrive or what they’ll cost can be hard. This uncertainty can discourage a lot of novice budgeters, but it’s easier than it seems. 

The trick is to put aside some savings each month into a general emergency fund. This way, you can save without having to put a name to it, and you’ll have the funds any time an unexpected expense comes your way.

Experts suggest saving three to six months of living expenses in this fund, but this can wind up being an enormous goal. Focus on how you can save up to your first $1,000 to take some of the pressure off. A line of credit can serve as a backup until you reach this target. 

New Budget, New You

Imagine what will happen if you manage to stick with your budget for a full year. It won’t be easy, but it can take some of the pressure off your finances.