“Managing your money effectively doesn’t always mean following conventional wisdom.” – Ray Charles Howard
Time for a check-in: How’s your 2025 budget going so far? We’re now three months into the year – that’s enough time for a decent go of the budget you set for yourself in January.
The most important questions beyond making sure that there is more money at the end of the month instead of more month at the end of the money, is to plan for the life you want.
Budgeting is a helpful start. It is only a start, because what you are budgeting for makes a big difference. There is Financial Planning, and there is Life Planning, to discover what it is you want to do with your money. Still we will start with budgeting. Here are a few tips for you on adapting your personal budgeting template to best suit your situation…
Tip #1: Be more optimistic. A recent study found that setting a tighter budget led to a 22 percent reduction in spending. Why? Because when you aim REALLY high, even if you miss, you’ll still accomplish more than if you aimed lower.
So, when you’re plugging your expenses into your budgeting template, set your spending goal about 20-25 percent lower than what you estimate you usually spend.
Tip #2: Automate. Any to-do you can automate means one less tedious task on YOUR plate. Spreadsheets and apps have built-in functions for things like calculating totals, categorizing your expenses, and tracking remaining budgets. It’s also helpful to create conditional formatting to help you see where you’re overspending or under-budgeting. And you can even connect it to your bank account to automatically pull in your transactions.
Tip #3: Make savings a fixed expense. You need to add savings to your category of fixed expenses, because it really is THAT important. It needs to be a non-negotiable line item in your regular financial habits. If you treat it like a fixed expense, you won’t skimp out on it.
Tip #4: Crack down on the lattes. Little regular expenses really add up – and every one of them needs to go in your template. Yes, I’m talking about those caramel macchiatos you treat yourself to once a week. You might think it doesn’t make a difference, but it does. And you make your budget template weaker by leaving it out.
Tip #5: Review and update. What you’re doing right now… do it more often. Regularly take a good, hard look at your budget. Find what’s not working and make changes. Think about how any recent life changes are affecting your finances and pivot accordingly. Your budget should never be written in ink (or gathering dust).
Tip #6: Budget for taxes. Most people don’t budget for taxes – and it gets them into trouble. Which is why it’s crucial to understand your tax liability and save accordingly. An example I see all the time is property taxes. A lot of people get blindsided by them, and it really sets them back in their budgeting.
So, if you’re a homeowner, make sure to include an “annual property tax” category in your personal budgeting template and contribute to it over the course of the year. Or, if you have a mortgage, you may be able to use an escrow account.
Tip #7: If you’re self-employed – budget for MORE taxes. If you don’t have a previous year’s tax payments to look back on, set aside about 30 percent of your income for federal taxes. This will cover your estimated taxes and self-employment tax, which is 15.3 percent of your net business profit + Social Security and Medicare on the first 160.2K you make + 2.9 percent on whatever you make exceeding that.
(Don’t forget to account for state taxes as well!)
Let’s make sure we’re talking about deductions you can take for next year’s filing before tax time rolls around. Then you can adjust that amount in next year’s budget.
In reality, if your goals are important enough, you will figure all of this out.
And, you’ve only got about a month left to file if you have not yet done so, and until the end of this week to get your documents to us if you want to file by April 15th.
