This budget plan is easy to set up and stick with in the new year. 

By Jenny Hoff, Headshot courtesy of Jenny Hoff

One of the most popular resolutions for the new year is shaping up  finances. But unlike getting in physical shape, financial fitness can feel a little more complicated. The key is to keep it simple and create a system  you can stick with. In a podcast interview with financial advisor Hilary Hendershott, she suggested skipping itemizing and instead, creating three simple spending buckets: yesterday’s promises, today’s funds and tomorrow’s dreams. 

Here is how you can get started. 

1. Figure out how much you bring in each month.  

This might seem like a simple step, but it’s more than just knowing your salary, which is pre-taxed. Look at your bank account. Note how much is deposited with each paycheck and calculate how much you actually bring in per month. If you’re self-employed or own a business, calculate how much you make each month after taxes. 

2. Calculate what you owe every month (yesterday’s promises). 

This includes your mortgage or rent, car payments, student loans, life insurance, utilities and former credit-card bills. (With this system, you won’t be racking up any new debt.) Pay these bills from the bank account where your paychecks are deposited. This is sacred money and not to be tapped into for any reason. 

3. Use prepaid cards for daily expenses (today’s funds). 

After subtracting what you owe every month from your income, choose a reasonable amount from what’s left that you think you’ll need for daily expenses for a month. Then put that amount of money on a prepaid card. If you prefer to split it up even further into weekly amounts, do that. This way, every time you make a purchase, you will see how much you have left for that week or month. Consider this a “spend-down” card. Instead of seeing how your debt grows every month on a normal credit card, you are watching your allowance dwindle as you spend. If you find that you are reaching the bottom of this allowance too early in the month, get creative instead of dipping into your other funds. Brown-bag your lunch, catch a ride with a friend or have a date night that doesn’t involve money. Within a couple months, you’ll have adjusted to the new budget. Remember, it’s not about denial. You can still go out with your friends for happy hour or catch a movie. It’s about learning how to spend your money on what really gives you joy instead of spending it without thinking. 

4. Start a separate savings account (tomorrow’s dreams). 

Open a separate bank account for future purchases and set up an automatic transfer of whatever amount you want saved up every month. This account can be used for purchases you know you’ll want to make eventually: a car, a down payment on a home or even a fun trip with friends or family. Don’t have a credit card or debit card linked to this account so you’re not tempted to tap into it for your daily expenses. 

Once you’ve set this up, you’ll have an automated system in place. You’ll know what you owe, what you can spend and what you’re saving up for. Get this down first and then you can plan to tackle bigger financial goals in 2020. 


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