The winter holidays are a great time to spend with friends and family. Beyond observing the many reasons for the season, the end of the year is also a time for self-reflection: recognizing what you’ve accomplished, the challenges you’ve faced and overcome, and what’s ahead as the New Year approaches.

As such, you probably have many goals in mind, too. And as with any great undertaking, you’ll need a plan and resources to realize them. More often than not, that also means making sure you have the money to do so.

Revising your budget is a good starting point for figuring out your finances and recalibrating your priorities as you approach the New Year and beyond. When you revise your budget regularly, you’ll get a clearer picture of where your money is going and ensuring your goals remain in sight. Take this time to examine your spending and saving—we’ll help you get started.

Identify How You Spend

The first step in revising your budget is determining where your money is spent. Access the last month or two of your account statements and bills to compare your income and expenses.

Then, categorize your spending. Split them into generalized groups like:

• Transportation
• Groceries
• Health Care Costs
• Electricity and Water Bills
• Rent or Mortgage
• Outstanding Loans
• Entertainment or Luxuries
  

By separating your expenses into distinct categories, you’ll find it easier to identify where much of your money is going. Some of these expenses may be non-negotiable (like your utilities, gas, and rent), while others will seem frivolous (eating out, streaming subscriptions, etc.).

Finally, keep a tally of where your money went. Writing things down will make it easier for you to process this information—and keep you honest.

Identify Where You Can Improve

After separating your expenses into buckets, you may start seeing patterns. For example, maybe you were eating out more often than you thought, or one of those streaming (or satellite) services just wasn’t being used for a while. That’s money you could move towards building an emergency fund or paying down existing debt.

The same applies to non-negotiable necessities, too. For example, water and electricity bills note how much of those resources you used over a billing period. This can be your time to re-examine your usage habits to keep costs manageable. In other words, there are opportunities to re-evaluate your lifestyle and how it affects your money.

Turn Opportunities into Action

Now that you have a better idea of where your money is going and where it can go, it’s time to make an action plan. That is, revise your budget.

Categorizing your spending isn’t just for evaluating; you can also use it to plan for the future. Take your expected income for the next month and begin divvying it up amongst your various upcoming expenses.

Being predictable goes a long way toward controlling your spending. It also helps with your mindset: you already know the money will be used for something, so it should minimize the temptation to spend impulsively.

You can make grocery shopping lists ahead of time, and many of your bills should drop on a predictable date.

Need a better way to visualize how to split up your budget? There’s a great primer on budgeting types that can help you make concrete plans. One great starting point is the “50-20-30” strategy, which allocates half of your income to living expenses and debt obligations, 20 percent to savings, and 30 percent to everything else. This is a flexible starting point that lets you save for the future while allowing some wiggle room for luxuries (or even more savings, if you prefer).

As you go through the next month, make note of your spending, too. It helps to maintain a spreadsheet or keep a running tally that you update every time you pay a bill or buy something. Remember your categories and pay attention to the limits you put on yourself. Keeping tabs maintains accountability.

“Future-Proof” Your Finances

Now that you’ve covered the basics, it’s time to address the elephant in the room: the rising cost of living. It isn’t an exaggeration to think that the cost of everything just keeps rising. Practically speaking, there isn’t much an individual can do to stop it.

On the other hand, you can account for how to prepare for next time. It’s far easier to plan your spending than to react in the heat of the moment.

As you finish this next month with your revised budget, ask yourself how you would make ends meet if gas prices rose another dollar per gallon or if your grocery bill went up another 75 dollars. Preparing a response to these what-if scenarios will be much easier while they’re still hypothetical.

Other “what-ifs” and potential solutions include:

• Sudden onset of sickness – Increase contributions to emergency fund
• Streaming service increases rates – Downgrade or cancel current subscription
• Car accident – Review insurance and verify how your policy supports you
• Grocery staple shortage – Gradually stock up on canned goods or pickle your own
• Uncertain employment – Reduce luxury spending to put into savings
  

While it isn’t possible (or healthy) to think of every single thing that can go wrong, it does help to have a plan for events that are more likely to affect you.

Finally, after you’ve revised your budget and set your plans in place, be prepared to do it again at regular intervals. Taking a moment every so often to recalibrate your budget can go a long way toward keeping a stable financial footing.

Remember: First Florida offers many tools to help you stay on top of your finances as you enter the New Year. Check out our financial product calculators or view our other helpful resources to learn more.