In this episode, the host, Eric Rosenberg, discusses the importance of budgeting for the new year and how it can set the foundation for financial success. He breaks down the budgeting process into simple, actionable steps to help listeners take control of their finances.

Key Takeaways:

• Why Budgeting Matters – Budgeting helps reduce financial stress, achieve goals, and make intentional spending decisions.
• Review Your Spending – Look at last year’s expenses to understand where your money went and identify areas for improvement.
• Set Financial Goals – Define short-term and long-term goals, such as paying off debt or saving for a big purchase.
• Build a Budget – Categorize expenses, compare them with income, and adjust spending habits accordingly.
• Cut Back on Unnecessary Expenses – Identify areas where you can save and prioritize spending on essentials and personal goals.
• Automate Savings and Payments – Use automation to ensure bills and savings contributions are handled without extra effort.
• Monitor and Adjust – Regularly review your budget to stay on track and make changes as needed.

Eric Rosenberg:

This is a friendly reminder that today’s episode is intended for education and entertainment purposes only and should not be considered legal or financial advice.

Hello my friends. Welcome back to The Good Cents by Payactiv Podcast. As always, I am your host, Eric Rosenberg, and we are working our way into this brand new year. I hope you had a wonderful New Year’s and holiday season. With it being a new year, we decided it’s time to look at a new budget. That’s right. New year, new budget. We want to make every dollar count while counting every dollar in this new year. Maybe you have struggled with budgeting in the past. We want to take this opportunity to refresh our ideas about budgeting and get excited and power into the year with mastership over our money, let’s say. First, let’s take a moment to think about why we want to budget.

There’s a few different reasons, but one of the biggest ones is it reduces financial stress. Financial stress, anytime you’re worrying about money, it can affect your actual physical health. So we don’t want to be stressing about money. Also, it’s just no fun, right? We don’t like stress. We don’t want to worry. It’s better to focus our attention on the more positive things.

Next, it helps you achieve both short-term and long-term financial goals. Short-term goals could be things like covering your rent or mortgage payment, your utility bills, paying off credit card debt, avoiding payday loans. There’s a whole lot of different things you might want to do short-term with your money. And then long-term we think about things like maybe paying for our kids to go to college or saving for retirement. Maybe we want to save up for a house in the future if you’re a renter right now. Maybe you want to buy one. There’s a lot of different long-term goals too, and when we have our budget in place, we know we are making progress towards all of those goals because we’re tracking where our dollars are going and making sure they’re going to what we value most.

Finally, it encourages mindful spending and saving. We don’t want to just waste money on things. We don’t want to mindlessly just go to the store and shop and buy things that we didn’t know ahead of time we actually needed or really wanted. We shouldn’t just go get something because your neighbor or your friend got the same thing or your relative. I always say, don’t worry about keeping up with the Joneses. The Joneses probably have $10,000 in credit card debt. So don’t get something just because someone else has it. Get it because it’s something you truly value. When we look at our budgets, we can find those things we don’t value as much and eliminate them so we can focus our funds on those things we do care about most.

Remember, budgeting is for everyone. It doesn’t matter how much money you earn or how little money you earn. People who make millions of dollars a year should stick to a budget. They should know where their money’s going, and people who are just scraping to get by should also be focusing on their budget. Remember, every dollar counts, so we really need to take the time to get that budget in place. If you don’t like the term budgeting, which I know a lot of people don’t, it’s okay to think of it as a spending plan. That’s another good term for it is a spending plan.

To start building this new year, new budget, review last year’s spending. Hopefully, you used an app. If you use the Payactiv app for the whole year, you should have an entire year of financial records in one place. You can just pop open the app and see by category where you’ve spent. There’s other apps you can use for that too. Some are free, some are paid, but we want to know where our money’s gone. Depending on what you use for your banking, if you use a debit card or credit card for most of your purchases rather than cash, you might even be able to go into your account and see a breakdown by category there.

That’s the first thing to do, is understand where our money went last year. If you didn’t keep track or used cash, it might be a little trickier to figure out where your money has gone, but if you did use a card like the Payactiv Visa® Card*, it makes it a lot easier. Remember if you didn’t keep track using a tool, you can also pull up your bank statements and other financial statements and type into spreadsheets based on what you’ve done. Or you could go to your online banking and download copies of your statements and upload them into spreadsheets. Sometimes you can just download your bank data and transaction data directly. Once we’ve categorized and understood what we spent on last year, we can review to see if that aligned with our goals. Now, maybe you saw that you spent way more on clothes than you expected or way more going to the movies than you expected or who knows what. Everybody has their own different financial habits. So looking at and identifying where you’re overspending can help you think about how you can free up funds for your financial goals for this year and going forward.

Now we want to focus on step two, which is setting clear financial goals. First make those short-term goals. It could be to pay off a specific debt, save your first $500 emergency fund or $1,000 emergency fund. Anything short term you want to achieve, list those out and we want to build those into our budget. Again, long-term also are important. Long-term goals. That could be things like saving for a vacation or increasing retirement contributions. If you have a 401(k) at work, make sure you’re taking full advantage of that, especially if you get a match because that’s like free money. You don’t want to leave that on the table. So get those long-term goals and short-term goals listed out and figure out how much you want to put towards those goals every month. Now, if you have a short-term goal you want to achieve in six months, maybe you want to save $600 in six months, that’s $100 a month that you want to allocate to that goal in your budget or $25 a week. That’s possible. That’s doable for a lot of people to save that up. So think about how you can achieve that by building those very specific goals into your budget.

Next, step three. You want to build out that monthly budget. So you can look at your spending from last year and use that as the initial starting point for your budget. Take, let’s say you spent $1,200 on groceries last year. That’s just a totally made up number so I don’t know what your spending would actually be, but if that’s what you spent on groceries, you could divide by 12 and then say, “I put $100 a month into this category in my budget.” To do that for all of your main spending categories and that’ll help you build up your spending plan. You can then compare that to your average monthly income.

If you get paid a salary, it’s a little bit easier, but if you get paid hourly like many of us do, look at what you made per month on average. You can look at your W-2 form or your last pay stub from last year. Because it’s getting to be tax season, you’ll probably have your W-2 or 1099, however you get paid, very soon. You can divide that by 12 and that’ll give you your average monthly income. Now you have your average monthly income and your average monthly expenses from last year, or we can start tweaking and making it work better for us.

Now, if you don’t like getting those super fine-tune categories, like I do, you could also maybe think about something like the 50/30/20 budget. That’s a simpler budgeting method where 50% of your budget is allocated to needs, 30% to wants, and 20% to savings and debt repayment. That’s one that a lot of people like. I like to get a little more granular. I like to break down groceries versus restaurants and car spending and home spending and everything else that we have to put money towards every month. I like to get really detailed, but some people like that higher level, and that’s okay. Just pick a budget method that works for you. It’s something that you’ll really follow, something that you’ll stick with.

Now, again, we’re going to look back at what we did last year, our average income and our average expenses per month, and we can start looking for places where we can cut back. First it’s those things that you just don’t value as much. Maybe you’re paying for cable TV and you don’t watch TV that much. Maybe that’s something you can cut. Maybe you found you have too many online subscriptions for streaming services or who knows what. It’s easy to get a lot of subscriptions these days. That’s how they get us, right? So maybe find a subscription or two you don’t need anymore, the ones that you use the least. Look at impulse purchases, impulse shopping. Maybe that’s somewhere you can cut back.

Another big common budget buster is dining out, going to restaurants. It’s a lot cheaper, even when groceries feel expensive, which they’ve definitely gone up over the last few years, it’s still a lot more affordable to buy groceries and cook at home. We’re actually going to have a blog post on this very soon. So make sure to check out our post on the Payactiv blog on how to save on your grocery budget. But if you spend more though on restaurants, it might make it feel like you’re spending less on groceries, but you’re spending a lot more overall. Those are some common places.

Remember when you cut back, we don’t want to give up everything. We don’t want to give up our happiness. On a recent episode, we had a guest, Whitney Hansen, a good friend of mine, and she said that when she was really trying to figure out ways to tighten her budget and cut her spending, she knew she didn’t want to give up going to the coffee shop regularly, but instead of getting an expensive vanilla latte, she started getting just a regular plain drip coffee. There are ways you can make incremental improvements without totally cutting out things you enjoy. Or maybe you just do something less frequently. Maybe you were going to the movies every week and you switch to every other week or once a month. There’s lots of different ways you can find to cut back on spending. Also, remember to do things like shop around for insurance. Car insurance goes up and up and up it seems, and if you change to a new insurer, even keeping the same policy protection level, which I’d recommend always having good and adequate insurance, you might be able to save big there. I saved about 50% on my insurance. I was shocked by changing insurance companies just for one of our cars for my family, not both. Shopping around, you might save money there too.

Next, we want to go on to step five, which is making your savings automatic. I set up so many automations in my finances. Early in my career when I was just a single guy starting out with my money, I automated paying off my student loans till those were paid off. I automated my car loan. I put extra in every month so they’d go away faster. I automated putting money into a savings account to build my first emergency fund. I automated a little bit of investing, and of course I took advantage of my 401(k) at work to get that match. That was all automatic. I took care of all those big have-to-do bills and expenses related to debt without thinking about it. I also took care of my paying myself first goals, savings and investments automatically. I even automated using my bank’s bill pay paying my rent. They would send the check automatically to my landlord once a month, so I didn’t even have to think about it.

There’s lots of things you can do to automate, but when you do that, remember it’s important to check in every once in a while. You don’t want to accidentally overdraft or overdraw your accounts because you automated too much. You need to make sure you have more coming in than going out from your accounts. You can set up all sorts of different automatic transfers. Most banks allow it. The Payactiv app actually has a really cool feature where you can automatically save¹ a portion of your paychecks. You can set up automations that will transfer funds from your main part of your Payactiv account into a designated area specific for whatever goals you want, which if you don’t have an emergency fund, that’s a great way to get started saving your first emergency fund. Those are the big steps we want to take to build our budget. Now, you should have something in front of you, either on the computer or your phone or paper and pen, however you decided to do it, where you see your average expected monthly income and where your money is going.

Now we want talk about how we stick to this budget because budgeting is only as useful as we follow through. So check in with your budget at least once a month to make sure you are not spending more than you expected in certain areas. Remember it’s okay to adjust your budget if you find you really have to spend more on, let’s say gas because of your commute or dropping the kids off at school, wherever you have to drive, maybe you have to raise your gas category or another category, your grocery category. But if you do that, make sure you can lower another category so you still come out even or ahead when it comes to your savings and avoiding overspending.

If you like to use cash … I like to use a card. I think that’s the safest. Well, I know it’s the safest way to pay and it’s the easiest way for me to pay. But if you want to use cash, there’s another really cool method you can use to stick to your budget called the envelope method. With that, you withdraw cash on your paydays, however you want to do that, from an ATM or at the bank, and you put the cash into envelopes and each envelope will have one budget category. Once you’ve spent all of your money from that envelope, from that category, you’re done with that for the month and you have to wait until you refill it next time. That’s called the envelope budgeting method. If you use the Payactiv card or another debit card or a credit card, you don’t have to worry so much about that, but that makes it easier to overspend sometimes to really do check in on that budget. If monthly is not enough, you might want to even check in weekly on your spending. Maybe you set up a time every Sunday afternoon or every Monday after work. Whatever schedule works for you, make sure you’re checking in.

Another cool idea is to have an accountability partner. Now, for a lot of people, talking about money is a taboo, which I think is really unfortunate. I think if more people talked about money, we would all have better financial health. But if you can find an accountability partner, whether that’s a spouse or a partner you’re living with or just a really good friend, you can share your goals and hopefully they can do the same and you can check in with them once a week, once a month, whatever schedule makes sense to you, to make sure you are on track for your goals. Remember, it’s okay to be flexible. Life happens sometimes you have to adjust. If you think you’re going to spend more in one category in the next couple of months, just try to plan for it. See if you can cut back somewhere else so you can avoid going into debt. Debt can be very expensive and very difficult to get out of, so if you’re able to pay for things out of savings like the emergency fund we talked about, that’s definitely a helpful and financially savvy way to go rather than going into debt.

That’s all we have for today. We wanted to make sure we get the year started on the right foot forward, so please jump in there. Get your budget underway. If you’re not already using it, the Payactiv app is a great way to manage your budget. You can even get your direct deposit on the Payactiv card there and have all these really cool budgeting tools, it’s built right in, every payday. Be sure to check that out. If you don’t already have it, go to the Apple App Store or the Google Play Store to download.

Thank you so much, and if you have seen any big wins in your budget or find somewhere you’re struggling, be sure to check out our social media. You can connect with Payactiv on Instagram and elsewhere. Send us a note. Let us know what’s working well, what you’re struggling with, and how we can help because we want to support you on your financial journey. Thank you so much and we appreciate you listening till the end. Until next time, keep living the life you’ve earned.

¹Goal-based saving is a set-aside account, and you will not receive interest or other earnings on the funds within the goal-based account.

*The Payactiv Visa Prepaid Card is issued by Central Bank of Kansas City, Member FDIC, pursuant to a license from Visa U.S.A. Inc. Certain fees, terms, and conditions are associated with the approval, maintenance, and use of the Card. You should consult your Cardholder Agreement and the Fee Schedule at payactiv.com/card411. If you have questions regarding the Card or such fees, terms, and conditions, you can contact us toll free at 1-877-747-5862, 24 hours a day, 7 days a week.