January is the first month of the new year, it’s the month for resolutions and promises to make changes and do better in your life. It’s also the month after Christmas, a month in which we get paid earlier and often spend more what with food, presents and parties, as such it is often a month where your finances are often out of sort. In spite of this, it’s a great time to take stock of your financial health.

Just as you would with your physical health, you’d make a note of how you’re feeling and what you need to change and improve on and just like with your physical health there’ll be areas of fat to trim but thankfully no physical exercise. So how do you do it?

Firstly, before you begin tracking spending or creating a budget, take stock of how much money you have coming in and how much you’re left with at the end of your pay period. Those numbers are important because they will let you know if your budget will run a deficit, balance or have a surplus. It’s also important because it allows you to know if you need to reduce your budget or if you have leeway to add an expense or increase savings.

Now that this is done, it’s budget time. List your fixed expenses and tally totals up. Are any of these ones that can be decreased or removed entirely such as cable or cell phone service or even things like gym memberships. Cancelling memberships you no longer use or lowering the premiums on plans where you use less than you’re paying for is a great way to get money back into your pocket.

Next, take stock of all your variable expenses such as transportation costs, grocery bills and any other expenses that don’t have fixed costs attached. Which of these can you decrease or eliminate altogether? By this point you’re probably either in the mind frame of nothing can be cut or cut everything and neither mindset is reasonable. There are ways to decrease a variable budget, whether by carpooling, buying in bulk or reducing some of your vices such as eating at home more instead of dining out that often. Likewise, it’s not reasonable to expect yourself to go from eating out every meal and liming all weekends to becoming a homebody overnight. Allow yourself flexibility in your budget and remember budgets aren’t stagnant, it’s acceptable to change your budget as your lifestyle changes.

Now that you’ve budgeted your monthly expenses, it’s time to list your annual expenses such as insurance, vacations and holiday spending. Putting aside money each month that is designated for those purposes ensures that your budget doesn’t take a hit when these expenses become due. This allows you to continue living your lifestyle without having to take an unnecessary loan or max out a credit card for a planned expense.

You’re probably thinking, all this makes sense but something’s missing and you’d be right. Every budget should include some form of savings. While 10-20% is the accepted amount, only you can determine how much is right for the budget. The important thing is that you save and that your savings are separate from the money you use for spending. If you have multiple accounts, you can use an automatic deposit to move the money for savings to one account, ideally one without an ATM card and the money for annual expenses to another account.

Once your budget is completed, the only thing left to do is track your spending over the months and see what areas in your budget needs adjusting.

Getting your financial health in order is not difficult. Once you take the time to budget and track your spending and make changes so you can save and afford the lifestyle you want to live its possible to keep your finances on the right track and decrease your risk of spending your money badly.