New Year Budget Review

Posted by Mike Smith :: January 7, 2008 @ 9:13 am

The start of a new year is an excellent time to review your budget. If you don’t yet have a budget, it is also a great time to start one. The changes that inherently come with the New Year are the main reasons why a budget review makes the most sense at this time.

The main reason that a yearly budget review is appropriate now is that seasonal and one-time expenses from the previous year can be analyzed to help you plan your budget for the coming year. Whether you budget more for seasonal items when they are expected to occur, or spread the costs out over the entire year, looking at the previous year will help make your estimates for the current year more accurate.

Another reason why budget reviews make sense at the start of the year is that your income and expenses may have changed. Depending on the elections you made during your benefits enrollment, which typically take effect at the start of each year, you may see a change in the amount withheld from your paycheck. Many companies also offer year-end bonuses or salary increases that become effective January 1st.

Understanding your potential expenses, including planned purchases of big-ticket items, will help identify any borrowing needs you may have. Your budget review may also uncover areas for potential savings or categories that you hadn’t planned for in the prior year. You may be able to free up money for investments in such vehicles as a person-to-person loan portfolio on Lending Club just by analyzing the aspects of your financial life that have changed. Remembering to include savings and investing in your budget will help to automate this process and thus make you more likely to meet your financial goals.

The information from the previous year and the knowledge of any income or expense changes for the coming year should enable you to adjust your budget accordingly. Getting off to an accurate start will help your finances all throughout the year.