5 Important Reminders as You Start Your 2026 Budget

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It’s that time of year when people decide to give budgeting another try! A fresh start at improving your finances is a popular plan for the new year.

And I wholly approve! Of all the goals you could make at the new year, budgeting is one of the best! So many people are suffering financial stress that could be relieved with the help of a budget.

I love budgeting! Nearly thirteen years ago budgeting changed our family’s financial trajectory. In 2013, we were a family of five making less than forty thousand dollars a year and in six figures of student loan debt. Budgeting not only helped us climb out of that debt faster than we had planned, but helped us feel financial peace in the process.  After experiencing the power of a budget, we wouldn’t think of going without one.

If your goal is to start (or re-start) a budget this year, then I would love to help you be successful! What are your biggest struggles with budgeting?

Here are 5 budgeting fundamentals to remember as you start your new budget this year:

1. Only budget money you actually HAVE

To have a useful and effective budget, you need to work in reality, not the abstract. Don’t guess how much money you’re going to receive later this month. We aren’t trying to forecast the foture. Just use the real money you have right now.

If you haven’t been budgeting lately, then start with the total that is currently in your checking account. Assign all of those dollars to a budget category. All of the money will stay together in your bank account. Your budget will be in charge of knowing (and reminding you) what each dollar’s job is.

Then as each new paycheck hits your account, you’ll decide what you need that new money to do for you.

2. Brainstorm all of your spending categories

Look through all of last year’s bank and credit card statements to make sure you think of everything. It’s easy to think of the categories you spend from regularly, but sometimes the ones that pop up only occassionally are also the most expensive ones!

I like to think of my budget categories in a few different groups: Fixed Monthly Expenses, Variable Monthly Expenses, and Periodic Expenses (sinking funds are perfect for these). Here are some budget category examples to get you thinking.

Fixed Monthly Expenses

• Mortgage/Rent
• Health Insurance
• Car Insurance
• Homeowners’ or Renter’s Insurance
• Cable or streaming subscription
• Phone (anyone still have a landline?)
• Cell Phone
• HOA Fees
• Debt Payments
• Utilities (trash, internet)

Variable Monthly Expenses

• Giving
• Groceries
• Eating out
• Gas
• Household
• Kid Expenses
• Entertainment
• Gifts
• Utilities (gas, electric, water)
• Cell Phone (if plan varies by usage)

Periodic Expenses

• Life Insurance Premiums
• Car Registration
• Annual Subscriptions
• Car Insurance
• Property Taxes
• Club or Association Fees
• Domain Registration Renewals
• Tuition
• Car Repair
• Medical/Dental
• Christmas
• Vacation

3. Prioritize your spending

Once you’ve thought of all of the budget categories that you’ll need, think about all of the things you need your money to do before you get paid again. If you can’t fund all of the categories of your budget with one paycheck or with what’s currently in your checking account, don’t panic. Start with the most important ones. You don’t want to be buying birthday gifts or funding your date nights when you haven’t assigned enough dollars to keep the roof over your head yet.

Keep in mind you can partially fund a category. For example, if you get two paychecks per month, you might fund the rent category halfway with your first paycheck and then cover the second half with your second paycheck. Then, you’re ready to pay your rent in full when the first of the next month rolls around.

If you haven’t been budgeting lately and you use a credit card, remember that some of your money is already spoken for thanks to last month’s spending. Be sure to budget for paying that credit card bill. In the future, your spending will be “used up” from your budget (even though it hasn’t yet come out of your checking account) when you spend it, so you will have the money waiting safely and patiently in your checking account to pay that bill.

It’s important not to budget any money that you don’t have yet, so when you run out of money to budget and you have zero dollars that aren’t yet assigned to a budget category, STOP! Wait until you have more money before you fund your other categories.

4. Budget ALL of your money

The other scenario is that you fund all of your essential categories and then have more money left.  Having money left after funding all of your budget categories is a great feeling, but you need to do something with those dollars. If you don’t give those “extra” dollars a job, then they will disappear and you won’t know where they went. Having extra unassigned dollars will tempt you to be lazy at following your plan and will hinder you from reaching your goals.

So what should your “extra” money go toward once your regular budget categories are covered? This is where it gets fun! You get to work toward your goals. If you have debt, use that extra to start paying it off! If you haven’t started any sinking funds for your large annual expenses, unexpected expenses, and savings goals, now’s the time to start! If you want to take your budgeting to the next level, set a goal of being a month ahead!

5. Keep keeping track

It’s not enough just to set a budget at the beginning of the month. You have to keep track of your spending along the way. Subtract your spending from the amount you have budgeted for each category. That’s how you know how much you have remaining to spend. Always check what you have remaining in a category before spending more.

How do you keep track? You can use a pencil and paper, make your own spreadsheet, or use an app. My preferred method is using the YNAB app because it does all of this seamlessly with no math or technical skills required. When you have a solid way to keep track of your spending, you can trust your budget to keep your money organized. Instead of looking at your checking account to see if you can make a purchase, you should look at your budget to see if you have funds remaining in that particular category. Of course you can always move money around from different categories if your priorities change. Reconcile your budget with your various accounts so that you are sure that you can trust what your budget says.

Don’t give up!

Budgeting definitely has a learning curve, but if you stick with it, it will get easier. You are going to continue to use and need money for your entire life, so the time and effort you put into learning to manage your finances now, will pay off for so many years to come!

It’s normal for your budget to change throughout the month. Life happens and it’s not always predictable. Your priorities will change from one week to the next and that’s fine. You just re-allocate your money to reflect what’s most important to you. If an owl randomly flies into you and knocks your side mirror off while you’re driving down the highway, then you might need to move money around to cover that expense. Changing your budget doesn’t mean you failed. Your budget is meant to be flexible. Just remember that if you increase the amount in one category you need to subtract funds in other categories to make up for it.

And if you want to start fresh, you don’t need to wait for a new year to start again. You can have as many fresh starts as you need, as often as you need.

You can do this! Next year’s self will be so glad that you started now!