It is a time of celebration and we always hope that it will be a happy new year. But we cannot forget the financial stress that often comes with the celebrations. Here are some ways to manage your finances for a happier new year.

You can start by not going overboard with things you don’t need. If you have been planning to buy expensive gifts for your kids, then you can instead pool that money towards their college fund or savings account.
You could also start a tradition of spending time together as a family and not splurging on expensive meals and having fun instead at home where you have everything you need.
There are plenty of things that one could do to make this year financially stress-free so enjoy your holidays!
The one personal finance move that we all believe will be the answer to all our money problems is to live by a budget.

In theory, budgeting is a pretty simple exercise. You assess the available income, list expenses, and saving requirements, and then make sure there is a plan to cut back the expenses, to manage within the available income. However, most people don’t seem to be able to stick to their budget? The answer lies in the details. How well you tailor the budget to your particular needs and situation, will make the difference between success and failure. Given its importance, you need to fail-proof your budget, and here are a few ways to do it.

Focus on the details

Spend a month or two trackings how you spend your income. It is an important first step in building a workable budget. Note down each expense, however small. Credit card statements and bank account statements are useful sources of information that can account for large expenses.

Categorize to manage

Categorizing expenses helps allocate the available income according to the priorities, and identify the steps that you need to take to economize. Have a category for mandatory expenses such as loan repayments, rent, insurance, and other fixed expenses that have to be met first out of your income. Lowering the expenses in this category is possible only to some extent and can only be done over a period of time. The residual income after meeting this category is what is available to meet living and discretionary expenses. This is where you can exercise maximum economy to cut back on expenses and find savings.

Prioritize expenses and goals

You may not be able to achieve all your goals at the same time because of the limits set by your level of income and the expenses. To be able to set these targets, it is therefore important for you to sort out your money priorities. You then know what can be your immediate targets and which goals may need to be postponed.

Set targets for goals

Put numbers to goals to be able to plan better and remain focused. For example, instead of just setting the goal to save more or reduce debt, the goal could be to increase savings by 15% over the previous year and to bring rolling credit on credit cards to zero in 6 months.

Fund for emergencies

Have an emergency fund into which you can dip if there is an unexpected expense. In the absence of this safety net, you will be forced to deviate from your planned budget anytime there is an unplanned charge. But use the emergency fund with discipline. It is only to be used for meeting essential expenses that you may not have budgeted for; or for expenses that may need more money than you had budgeted for initially. And if you use this fund in any month, make sure that you replenish it as soon as possible.

For a budget to work, it should reflect your situation and priorities. Remember to update it whenever there is a significant change in your income or expenses. Don’t let small slip-ups dishearten you, recover and get back on track. Set yourself small budget-related targets and reward yourself when you achieve them. Over time, being in control of your money and living within your budget becomes a habit.