budgeting moves

If you’re one of the 44% of Americans who set a New Year’s resolution, chances are, you’re focusing on one of four goals — to exercise, eat better, lose weight, or save money. 

Whether you’re a New Year’s resolution devotee or not, it’s the perfect time to evaluate your finances and fine-tune your approach to reaching your financial goals. Try these eight budgeting moves to start your finances off on the right foot.

1. Make Specific Budgeting Goals

Budgets are all well and good. But many people make the mistake of trying to make a budget without having clearly defined goals of what they’re budgeting for. 

Before you outline your budget, write down some specific and measurable financial goals. Do you need to pay off debt? Are you saving to buy a home? Or does your retirement need an influx of cash? 

Not sure where to begin? The S.M.A.R.T. goal template is a simple way to outline goals and measure your success. Here’s how it works:  

  • Specific: Instead of setting a goal to save more money, nail down more on the specifics, like “I want to have a $5,000 emergency fund by the end of this year,” or “I’d like to max out my retirement contributions.” If your goal is more specific, you’ll be more motivated to reach it, and measuring your progress will be much easier to measure. 
  • Measurable: Having a dollar amount on your savings goals not only makes them more concrete, it also makes it much easier to gauge your progress. For example, if your goal is to save $5,000, you’ll need to reach $2,500 by mid-year. Measurable goals are attainable goals. It also may be helpful to use a chart or online tracker to monitor your progress. 
  • Attainable: It’s easy to dream big when setting goals for the year. But it’s important to set attainable goals. Look at your budget, retirement contributions, and savings from the past few years before setting goals for this year. While you always want to improve year-over-year, it’s not realistic to go from saving $1,000 a year to $15,000 the next. Look for incremental improvement. 
  • Relevant: Before setting your goals for the year, be sure they are relevant to your long-term financial goals. For example, it wouldn’t make sense to amp up your retirement contribution if you struggle with paying off debt. Similarly, if your child is nearing college age, it makes sense to double down on contributions to a 529 Savings Plan or other savings account. 
  • Timebound: What’s a goal without a timeframe in which you want to achieve said goal? Once you’ve set your goals for the year, put a timestamp on when you want to check those goals off. And while it’s easy to say you want to do so “this year,” it might be more productive to divide the year into 3, 4, or 6-month increments and set mini-goals within those time frames. 

As with anything, it’s important to be flexible when it comes to your goals. Unexpected costs will inevitably pop up, but don’t let them derail your long-term financial goals. 

2. Review Last Year’s Spending

Once you’ve established a few goals for a new year, it’s time to review your spending from last year. There are a few ways to do this:

Download bank transactions manually. Extend the view of your transactions to the entire year and download them as .csv files. If you generally stick with one account, it’s fairly seamless, If you use multiple debit and credit cards, combine all your transaction .csv files into one shared Excel or Google sheet. Then group your transactions by broad categories, like food, transportation, bills, and discretionary spending. This will give you an overview of your real spending versus your budget over a year. 


Use budgeting software. If you’re using an online budgeting program like Mint or You Need a Budget (YNAB), this becomes much easier. YNAB, for example, generates spending reports by category for a specified period, showing you totals and averages for each category. 

When reviewing your spending, look for a few key things — unnecessary expenses, such as unused subscriptions, a meal service you didn’t use consistently, or overspending on discretionary items, such as daily coffees or gas station snacks. 

Second, look at your highest-spend categories. Are you overspending in this area or is this truly the cost? If so, is there a way to save by buying in bulk, using a rewards program, or shopping sales? While your review of spending shouldn’t always focus on where to cut costs, most of us have areas in our budget that could use a little trimming. 

Read our YNAB Review

3. Don’t Forget About Your Sinking Fund

While it can be tempting to pay for periodic expenses like insurance, vacations, holiday gifts, and car repairs out of your checking or savings account, especially if your budget allows, try a sinking fund for these expenses instead.

A sinking fund is money you set aside to pay for preplanned, periodic expenses like vacations, property taxes, or Christmas gifts. It helps keep your budget on track and keeps you from “sinking” when these costs inevitably come around. 

To determine the amount you should save for your sinking fund, create a list of those pre-planned expenses from last year’s spending and add them up. You can either create a sinking fund for each category or have one giant sinking fund from which you pull when these expenses are due.

To calculate how many and how much you need to be saving in your sinking funds each month you’ll follow three simple steps:

  • Calculate the annual cost of your periodic expenses: Use last year’s numbers as a starting point, but feel free to cut down or add to specific categories based on last year’s spending or expected changes.  
  • Divide the total by 12 or account for bills that you need to pay sooner and divide by however many months you have to save.
  • Add the total to your monthly budget. Yep, it’s that simple. 

And don’t be afraid to alter your sinking fund, especially when it comes to discretionary expenses, such as your annual family vacation or Christmas spending. 

Take some time to think about these expenses. Are you happy with what you spent last year? Do you want to cut back on that spending, or do you anticipate needing to spend more this year? Either way, take this into account when you’re re-doing your budgeting for annual and periodic expenses.

Keep in mind that a sinking fund is different from an emergency fund. Sinking funds are meant to pay for expected expenses that don’t necessarily fit into your budget, things like summer camp, home insurance, or property tax bills. Emergency funds, on the other hand, are to pay for unexpected expenses that you don’t see coming, like unexpected car or home repairs or an emergency room visit. 

Try a high-yield savings account to house your sinking fund, separate from where you do your day-to-day banking. You’ll make a bit more in interest on this cash, plus you won’t mistake it for spendable cash later in the year.

4. Reevaluate Your 401(k)

A company-sponsored 401(k) is a natural and financially advantageous place to start retirement savings. That’s because contributions are withdrawn pre-tax from your paycheck, meaning they’re deposited into your account before taxes are taken out. And the average company-sponsored 401(k) match is 5%, so be sure you’re contributing the maximum amount to take advantage. After all, it’s free money.

The start of a new year is the perfect time to assess whether you’re on track with saving for retirement. Look at what you have saved for retirement and the investment performance of your 401(k). If it’s underperforming and you’re on the younger side, you may need to adjust your investments to be a bit more aggressive. 

Most investment firms also offer retirement calculators to show if you’re on track with your retirement goals based on your current contribution, so it’s easy to see if and how much you need to up your contributions to reach your retirement goals. If your year-end review at work resulted in a raise, even a small increase, consider making an increase in your 401k contributions. Even a small amount can make a huge difference over time.

Keep in mind that the 401(k) contribution limit for employees in 2023 is $22,500, while those age 50 or older can contribute $30,000. In 2024, that limit will increase to $23,000.

5. Plan Your IRA Contributions

While separate from your 401(k), an individual retirement account (IRA) is still a valuable retirement savings tool — especially for the self-employed or those who may not have access to an employer-sponsored 401(k). It also can serve as an additional means of saving for retirement once you’ve maxed out your 401(k) contributions for the year. 

For 2023, IRA contribution limits are $6,500, and $7,500 for those 50 and older. Next year, that will increase to $7,000 and $8,000, respectively. 

Want to max out your IRA contribution this year?  Divide your planned IRA contribution by 12, then set up an automatic monthly contribution from your checking account to your IRA account each month. 

Some make a lump sum IRA contribution, but if you’re not able to make one big deposit, simply start your monthly contributions in January. By the end of the year, your IRA will be fully funded with no lump sum required.

6. Plan Your HSA Contributions

If you have a high deductible health insurance plan (HDHP), then you probably have an HSA. (If not, get one. Trust us.)

A Health Savings Account (HSA) is a tax-advantaged savings account for qualified medical expenses. It’s often used as an additional retirement savings vehicle since the account rolls over from year to year and it stays with you from job to job. Contributions to your HSA are pre-tax and after a minimum threshold, usually $1,000, are invested like your 401(k) or HSA. 

At a minimum, you should save the amount of your plan’s deductible and preferably the amount you predict you’ll use for medical expenses in the new year. Refer to last year’s HSA spending to determine your expected medical expenses. But don’t be afraid to contribute more than that, since you can use an overage next year or even for retirement.


Lively is one of the best HSAs out there and they’re free for individuals. Savings are FDIC insured and when it comes time to invest your savings, you can do so with a Schwab Health Savings Brokerage Account or an HSA Guided Portfolio.

7. Re-evaluate Your Debt Payoff Plan

If you’re part of the 77% of Americans who have some sort of debt, reevaluating your payoff plan should be on your list this year. Paying off debt has many benefits, from increasing your credit score, earning you better interest rates, and lowering your credit utilization. 

If you already have a debt payoff plan, now is a great time to reevaluate it. Ask yourself questions like:

  • Could I make progress more quickly by changing the order in which I’m paying off debts? Paying off the highest-interest debt will save you money in the long run, while paying off the smallest debt will help you gain momentum. 
  • How can I increase the amount of money I put towards debt every month? Use your new budget to free up cash to apply to your debt. 
  • Could I save on interest by refinancing my debt to a lower rate? Take advantage of any refinancing opportunities or balance transfers that can save you money on interest.

Once you’ve finalized your debt payoff plan, set up automatic payments to keep you on track with payments. It also may be helpful to track your goals with a chart or spreadsheet that shows your progress in real-time. 

8. Compare Your Net Worth From Last Year

If you want one indicator of an effective budget, it’s this — did your net worth increase? Put simply, net worth is your assets minus your liabilities. So, what you own, like your car, investment portfolio, home equity, and liquid cash, minus what you owe, such as your mortgage, student loans, and any credit card balance. 

Your net worth reflects the sum of all of your financial decisions. If you need help figuring out your net worth, Empower has a free that tool lets you plug all your financial accounts in and instantly calculates your net worth.

Comparing your net worth from one year to the next is the best way to know if you’re moving in the right direction. It can prove you’re on the right track or be a sobering reminder to get back on budget.

Related: How and Why to Track Your Net Worth

Is taking a good hard look at your finances the sexiest end-of-year resolution? Not by a long shot. But by making important financial moves now, you can worry less about your money next year—and you’ll ensure you’re on the right track every new year to come.

Frequently Asked Questions (FAQ)

What is the S.M.A.R.T. goal template?

It’s a simple way to outline goals and measure your success, using the following principles: specific, measurable, attainable, relevant, and time-bound goals.

What’s the difference between a sinking fund and an emergency fund?

A Sinking fund pays for expected expenses that don’t necessarily fit into your budget, like summer camp, home insurance, or property tax bills. Emergency funds pay for unexpected expenses like car or home repairs or an emergency room visit. 

What is net worth?

Net worth is your assets, such as your home, investment portfolio, and liquid cash) minus your liabilities, like your mortgage, student loans, or debt.


  • Rachel Morgan Cautero

    Rachel Morgan Cautero is a full-time freelance writer based in Ponte Vedra, Florida. She writes on all things personal finance, from the best budgeting and investment apps to retirement tips and inheritance laws, to how to hack your next vacation on points. She was 2019 Pennsylvania Women’s Press Association Best of Journalism judge, an Experian #CreditChat panelist, and has appeared on Cheddar Life and NPR’s ‘On Point’ with Meghna Chakrabarti. Rachel's work has appeared in The Atlantic, Forbes, Nerdwallet, The Balance, Business Insider, Yahoo Finance, SmartAsset, HerMoney, DailyWorth, and Parents. She has a bachelor’s degree from Wittenberg University and a master’s of arts in journalism from New York University.