The Wall Street Journal, in its weekly “Personal Finance” column, recently featured some 2021 budgeting tips.  Here’s a synopsis of them with some additional thoughts from our own Jordan Arnold, CFP.®

Tie your budget to a relevant timeframe

For example, while an annual budget might be a good idea for a bigger picture view, it’s difficult to put into practice as no two months are alike.  I recommend starting with an annual budget based on your expected income for the year and then breaking it down to monthly or even bi-weekly budget, if that is easier to match your cash flow.  Make sure that you start with paying yourself first.  This means that you set aside a fixed percentage or dollar amount that you would like to save (I’d recommend saving 10-15% in retirement accounts) and then start including all of your expenses.  Budget categories that are often missed that I would recommend including would be car maintenance/replacement, medical expenses, property taxes, and license and registration fees.  I would also include in your 2021 budget a “Stuff I forgot to budget for” line item.

Get granular…and keep the big-picture in mind

The article’s next suggestion is to get even more granular with the budget, such as going from a pay-period-based budget to a daily budget, what the author calls a “micro budget.”  This approach, the author says, is a good approach if you find yourself asking, “where does all my money go?”  Strike a balance between little picture and big picture.  Don’t get too bogged down in the short-term nitty-gritty details, but don’t be too broad.  Daily budgets or “micro budgets” never worked for me but do what’s best for your situation.  Use automatic deductions and transfers to work toward those longer-term, bigger-picture goals, like creating an emergency fund or saving for a big purchase.

Celebrate short-term wins

Don’t only come down on yourself when you blow through a budget category but take time to celebrate those short-term budget wins.  If you’re looking for a good budgeting tool, my wife and I have used YNAB (You Need A Budget) for over a year.  It has some nice reporting features where I can review my spending and see where I over-estimated or under-estimated.  It takes time to refine your budgeting process.  Be gracious with yourself and don’t give up.  Budgeting gives you freedom and peace of mind knowing you are living within your means.


The information provided here is for general information only and should not be considered an individualized recommendation or personalized investment advice.