Wanna hear something bananas? I make my entire budget for the year in advance! For anyone who never budgets this sounds like mission impossible, or worse- a death sentence. I promise, budgeting isn’t restraining. Think of budgeting as putting a dollar sign to your to-do list. A budget is an executive life bucket list. You need to budget a year in advance!
First, I know what you’re thinking… does budgeting one year ahead mean you have no flexibility, spontaneity, or ability to go with the flow? Nope!
Budgeting is like goal setting.
You set your intentions of how you want life to look like and then adjust as circumstances change. For example, if you set a goal to run a marathon, but you end up tearing your ACL, then you’d take time off to recover. You’d pick up a different hobby this year and try again later.
I promise. Budgeting a year in advance is simply amazing.
This is part one of a series: Create Your 2022 Budget with Me. In the series you’ll also learn:
- The basic process how to budget a year an advance
- How to get clear on your 2022 income (even if you’re self-employed)
- Budgeting your fixed expenses
- Budgeting your flex expenses
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Five reasons why you need to budget a year in advance
1. Reduce Stress
The first and most important reason you need to budget a year in advance is to reduce your stress. According to an American Psychological Association poll money’s the number one stressor in America. Three out of four adults stress over money.
As a fair warning, it takes time and energy to setup your budget for the next 12-months. When you’re budgeting in advance the initial process is stressful. You tackle issues upfront and need to make tough decisions. However, once you do the work up front, the rest of your year runs smooth!
If you have a plan with your money you can relax. A 12-month budget frees up brain space and you can stress less about money for the upcoming year.
2. Set goals
The next reason you need to budget in advance is to set your goals for the year. Do you want to take an international trip? Ready to remodel your kitchen? Or maybe you want to start a new hobby like paddleboarding.
Goals and items on your bucket list also cost money! The kitchen remodel isn’t going to pay for itself.
In other words, the popular saying, ‘a goal without a plan is just a wish,’ could also be, ‘a goal without a budget is just a wish.’
When you have big goals, usually big expenses follow! Budgeting in advance will make your goals a reality. An annual budget empowers you to live the life you’ve envisioned.
4. Spend money guilt-free where you want
If you’re tired of feeling guilt, remorse, and uncertainty with money, then seeing your big-picture budget for the year will help.
With a 12-month budget you know ahead of time how and when you’ll make important big purchases, like a flight to Paris or new paddleboard.
Personal finance expert Paula Pant, says, “you can afford anything, but not everything.”
For example, if traveling’s important to you, you can find a way to afford it! You do have money for what’s important to you. You can make travel happen by saving on groceries and meal planning, cutting expenses, or getting a side hustle.
However, you can’t afford everything! For most people it isn’t possible to drive a new car, live downtown, eat out all the time, wear designer clothes, AND travel worldwide.
With a budget you prioritize your spending in line with your values.
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4. See if something’s gotta give
In addition to spending money guilt-free, you’ll also know if something’s gotta give when you budget in advance! This is a painful process, but there’s power in saying no to what isn’t important to you. Then you can say yes to what is a priority.
Maybe you’re budgeting for a three-week international trip AND your friend’s having a bachelorette party in Fiji. You can’t do both (without going into debt or struggling to make rent!).
It’s uncomfortable and awkward to make decisions to do one thing over another, but in the end, you’ll feel more peace. As a recovering people pleaser, I know when you spend according to someone else’s priorities you end up resentful and burned out!
5. It isn’t as hard as you think
Lastly you need to budget in advance for the year because it isn’t nearly as hard as you think it sounds. The next post I’ll explain an overview of the process of how to a 12-month budget ahead of time.
In a nutshell there are only two elements to make an annual budget: your income and expenses.
Generally speaking, forecasting income is easy. Depending on how you get paid, some months you might have three paychecks versus two. If your income varies or you’re self-employed you can reverse engineer your pay.
Most of your expenses are known, literally fixed, and 100% in your control! It isn’t a shocker how much your rent or car payment is, because you signed up for it!
Irregular or flex expenses aren’t too tricky to forecast either. You have necessities every month like groceries and gas for your car. Flex expenses like flights, renovations, new tires, car registration, gifts, etc. are what you’ll spend the most time forecasting.
Do you budget in advance for the year? Try it out this year!
P.S. Ready to crush your financial goals this year? Get started with a free 15-minute money coaching with me before the New Year even starts! Reserve your spot here.
