In 2023, 40% of Americans said they don't make New Year's money resolutions and 68% said they have no written financial plan at any point in the year. But having a budget and an awareness of exactly how much is coming in and going out is a key part of managing personal finances. CNBC asked financial experts how to set an annual budget for the New Year.
The first step is to figure out your income. "Knowing your income is extremely important because you know exactly how much you have to deploy," explained Elliott. "So typically for my clients, we get their pay stubs and look at their net play." Net pay refers to your gross pay minus taxes, withholdings and deductions such as Social Security, Medicare and employee benefits such as your health plan.
The second step is to calculate your expenses. They can often be split into two types: fixed and variable. "Fixed expenses are things like your rent, your mortgage, your car payment, things that you know exactly what it will be and how you can plan for it accordingly," Elliott said. "Variable expenses can be tricky since some of them you can control and some you can't," she added.
The final step is setting a goal. The budget parameter that many experts recommend is the 50-30-20 budget, where 50% of your take-home pay goes to your needs, 30% to your wants and 20% to savings for your financial future.
Chapters:
0:00 Introduction
00:48 Step 1 - Figure out income
01:36 Step 2 - Calculate expenses
02:49 Step 3 - Set a goal
Produced, shot and edited by: Juhohn Lee
Supervising Producer: Lindsey Jacobson
Additional Footage: Getty Images
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How To Set An Annual Budget
