Tax season is the perfect time to check in on your budget

January 23, 2024

While we often think of this time of year as tax season, you might want to start thinking about it as budgeting season as well. As you’re getting ready to file your tax return, you likely have all of your financial information in one place. This makes it a great time to go over your budget for next year.

Here’s an easy process that can help you check in on your budget and make the necessary changes you need to stay ahead in your financial life.

Step 1: Create budget categories

The first step is to organize your budget so that you can easily track your expenses and income. Create categories for your expenses to help you recognize where you may be spending more money, and where you can cut back. Budget categories can include:

  • Mortgage/rent
  • Utilities
  • Insurance
  • Food
  • Clothing
  • Household items
  • Entertainment

Because budget categories are to help you manage your spending, try to use labels that are helpful and relevant to your own life.

Step 2: Start tracking expenses

With your receipts and bank statements handy, start putting your expenses into categories. Remember to track everything, from your weekly latte purchase to one off medical bills. Tracking your expenses and categorizing them appropriately will start to paint a picture of where your money is going each month.

Step 3: Calculate your income

Use your pay stubs and other important information to calculate your income. Only track your net income, or, the amount of money you take home each month after taxes. Also, remember to include all income, not just earnings from your job. Other income can come in the form of interest payments on a savings account, capital gains on a stock purchase, or rental income from a property.

Step 4: Take a step back

Once your income and expenses are accounted for, it can help to take a step back and see what your budget looked like for last year. As you’re doing this review, ask yourself some important questions, like:

  • Where does it look like you overspent?
  • Which expenses were one-time and which are recurring?
  • Why did you spend more in some months than others?

These will help you as you start to think about budgeting for the future.

Step 5: Project your future budget

Now that you have last year’s expenses and income as a guide, you can start projecting your budget for the year to come. Consider reasons that your expenses might rise, like an increase in your rent, higher than expected inflation, or an upcoming vacation you are planning. The same is true when projecting your income. If you expect to get a promotion and raise soon, consider that when accounting for this year’s income.

Obviously, you can’t predict exactly what you will spend and earn in a given year, but these projections can help you get more comfortable with your finances.

Bonus tip: Use technology to help

Technology can be a great help when looking at your budget. By putting your budget into Microsoft Excel or another budgeting program, you can easily create charts and graphs that may help you visually see your spending, which can be very helpful if you’re a more visual person. Plus, keeping your budget digitally will allow you to easily access your budget later.

What are you waiting for? This is the perfect opportunity not only to prepare your taxes but also to get your budget ready for the year to come. If you feel overwhelmed getting started, reach out to us directly to schedule a meeting or ask a question. We’re here to help every step of the way.