Family Budgeting for a New Year

Think of your budget as how you steer the ship, financial expert Rachel Cruze says
December 23, 2020 Updated: December 23, 2020

As the new year approaches, many people see the blank slate as another opportunity to fine-tune their finances. One sure-fire way to do that is to create a budget and stick to it.

I asked Rachel Cruze, author, financial expert, and host of “The Rachel Cruze Show,” for her advice for families setting up a fresh new budget for a fresh new year. Here’s what she said.

The Epoch Times: Why is it important for a family to create and utilize a budget?

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Rachel Cruze is an author, financial expert, and host of “The Rachel Cruze Show.” (Courtesy of Rachel Cruze)

Rachel Cruze: A budget is simply a plan for your money. And you need to have a plan for your money! If 2020 has taught us anything, it’s that we need to be intentional with every dollar we have coming in. 

A budget will also help you and your spouse get on the same page with your finances. It forces you to talk about how you’re spending your money, your financial goals, and your dreams. Money is the tool that will help you achieve those dreams, and the budget is how you steer the ship. 

The Epoch Times: What steps should be taken in preparation for creating a new budget for the new year?

Ms. Cruze: I recommend a zero-based budget. This is where your income minus expenses equals zero. You’re telling every single dollar where to go. 

You and your spouse should sit down and do this together. But before you do, carve out time to dream together about where you want to be financially at the end of 2021. Maybe you’re working your way out of debt and want to have your student loans paid off. Whatever it is, agree on those priorities together and then make sure your budget aligns with those goals.  

The Epoch Times: How often should a budget be reviewed?

Ms. Cruze: I recommend doing a monthly budget. I promise it doesn’t take long. Once you’ve got your budget down, it becomes pretty routine. But whatever you do, don’t set it and forget it as the month goes on. Make sure you’re staying on track with your spending and saving throughout the month. I love using the free app EveryDollar to keep up with my budget.

The Epoch Times: What are some common budgeting mistakes people make?

Ms. Cruze: One of the biggest mistakes people make is not budgeting at all. It’s like a ship with no captain. At some point, someone has to tell the ship where to go! Burying your head in the sand and hoping for the best with your money isn’t going to set you up for success. It takes around 90 days to get your budget right, so show yourself some grace. You’ll get the hang of it! 

Another mistake I see is not putting your budget down on paper or using a budgeting app. You have to get those numbers out of your head.  

The Epoch Times: It seems that many people are resistant to budgeting. Do you agree? If so, why do you think that is?

Ms. Cruze:  Sixty percent of Americans don’t budget. People may think “I’m not good at math, I can’t budget.” But a budget is fifth-grade math. Anyone can do it! Personal finance is 20 percent head knowledge and 80 percent behavior. So it’s not a math problem, it’s a behavior problem. 

People are afraid to budget because they might not like what they find. They may realize they’re living on more than they make. It can be scary! But the first step to winning with money is to get intentional with the money you do have. And the way to do that is to budget. 

The Epoch Times: What are the keys to sticking to the practice of budgeting?

Ms. Cruze: Make sure that you’re planning ahead. For example, we all know Christmas is in December, but for some reason, it takes people by surprise every year. People go crazy and start signing up for store credit cards just to buy gifts. Plan ahead and save up for purchases. 

Another key to the budget is sticking to the budget. Sometimes, you have to say “no” to yourself. I am a natural spender, so I know how hard this can be. But saying “no” now doesn’t mean no forever. It just means not today.

The Epoch Times: Is there any other budgeting advice you’d like to share for the new year?

Ms. Cruze: It’s safe to say that 2020 threw us a few curveballs. Many people found themselves in a bad spot financially this year. Maybe you lost your job and had no emergency fund. Whatever it was, I want that to be your “never again” moment. You get to choose to manage your money differently moving forward. 

In 2021, I want you to live below your means. That means you are living on less than you make. I want you to commit to living a life without debt. You’ll always struggle financially if you’re relying on debt to get by. If you already have debt, there are three things you can do. 

1. Build a $1,000 starter emergency fund. This will give you peace of mind as you work your way out of debt.

2. Work the debt-snowball. List your debts smallest to largest, regardless of interest rate. Attack the smallest debt. Once that’s paid, roll those payments to the next largest debt and attack it. Repeat until you’re debt-free.

3. Once you’re debt-free, build a fully funded emergency fund of three to six months of expenses. The next time there is a global pandemic, you won’t be stressed. You’ll be prepared. An emergency fund turns an emergency into an inconvenience.

You can learn more about [managing your money] through a free trial of Ramsey+ (DaveRamsey.com/never-again), where you get access to Financial Peace University, EveryDollar, and so many other tools and resources to help you win with your money.  

Follow Barbara on Twitter: @barbaradanza