A lot of people tend to budget monthly, organizing their ingoings and outgoings at the start of each month. While this can work well and is a good habit to get into, yearly budgeting can also be an effective method of keeping on top of your finances. This is because by having the entire year’s budget organized, you can ensure that you are properly prepared for each and every cost that comes your way.
A yearly budget can work incredibly well when it comes to staying on top of your finances; it’s just a case of determining whether it’s the right option for you. To give you a better understanding of the benefits of yearly budgeting and how it works, below we’ve put together a handy guide to everything that you need to know.
What are the benefits of yearly budgeting?
One of the major benefits of yearly budgeting is that you will have a long-term financial plan in place. Instead of only looking at the month that you are in you will have a plan of all your outgoings for the year. This means that if one month you have money left over once you’ve paid the bills, instead of splurging it, you can first look at what outgoings you have coming up. This will ensure that even if you spend the leftover money from the month that you’re in, you will still be able to afford to cover all costs for the upcoming month.
Another benefit of yearly budgeting is that all of the costs for the upcoming year are factored into your budget, from your monthly bills to your car’s annual service. Annual budgeting can also make affording things like vacations, birthdays, and Christmas, easier as you are able to plan for them in advance. Take Christmas, for instance, say you want to do most of your Christmas shopping at Fingerhut to save money, you can budget a set amount to spend on your Christmas shopping in the three or four months leading up to Christmas. This will help to reduce the stress that comes with paying for Christmas.
What’s the best method to use?
When it comes to the best methods of yearly budgeting, it depends on what works for you. However, a good method to use is creating a budget for each month and then totting up the outgoings for each period, as well as the incomings, to get an outgoings total and an incomings total for the whole year. If you need help with this, there are plenty of apps that are incredibly quick and easy to use and make budgeting much simpler and less stressful.
In terms of any surplus funds, you need to be smart about how you spend them. Work out what spare money you will have for the year, and you can then choose what to do with that. Although it’s fine to spend some of your spare money on treats, such as days out and vacations, it’s also a good idea to save some in case any unexpected costs come up.
So there you have it, a guide to how yearly budgeting can make family life easier and less stressful to manage the costs for.