Part of our build your own financial plan series

Woman who is creating a budget to determine how to fund her financial goals.

How to fund your 2020 financial goals: Start with a different kind of budget

Looks like 2020 is the year you’ll get your finances on track. Nice work making that a priority. Your first step is to tackle goal-setting and complete a financial goals worksheet (PDF) to identify and prioritize:

  • Short-term goals—6 months to 5 years
  • Mid-term goals—5 to 10 years
  • Long-term goals—more than 10 years

Make note of the current savings you’ve put toward each. If you’re short of money on a goal, how do you fund that?

Yes, the dreaded “B” word. (Budget.) Where can you cut back? What are your priorities? Because when you can “find” extra money to save and invest (and potentially grow), goals can become more attainable.

Back into a budget

“Some people resist doing a budget because they think it’s going to restrict them from spending the way they want,” says Stanley Poorman, CFP®, a financial professional with Principal®. The reality is that most of us overspend just because we don’t have a focused plan.

Think of a budget as a tool that organizes your monthly cash flow to include your saving and investing goals. That’s a shift in thinking. Rather than treating a budget like some kind of starvation diet, you’re putting yourself in control of an organized financial plan.

You’ll record what’s coming in and where it’s going.

Then pay yourself, putting a set amount toward your goals. 

The rest of the money is yours to decide how to spend.

That’s it. That’s the budget.

Since we’re financial types, we’ve got you if you want step-by-step instructions:

  • Use our downloadable budgeting to fund your goals worksheet (PDF) and jot down what’s coming in, what going out. Look at recent bills plus bank and credit card statements to give you the facts. (Be realistic. No cheating.)
  • Adjust. Prioritize. Revise, as needed. (Fixed = bills you’re committed to paying. Discretionary = you have some control over what/how much you spend.)
  • Make note of your monthly take-home pay. Subtract your new/revised budget. See what’s left that you could put toward your goals.
  • For each of your goals, check whether it’s fulfilled or needs more funding, and if it’s a “critical” goal.
  • Decide how much of the extra money you’ve found could be put toward your critical short-, mid- and long-term goals. Log it on the worksheet. Once you’ve made good progress toward the critical goals, start tackling the rest of ‘em.

2020 budget still coming up short?

Don’t panic. You can continue to look for ways to adjust your spending and saving throughout the year. For example, a good next step would be to focus on tax planning. (To learn more, read: How to keep more of what you earn.)

Here are a few more stories that may inspire you to think about your budget in new ways:

More income ... can mean faster progress

Of course, more income helps, too. Lots of people have a side hustle for extra money. Maybe you can teach a community education class about container gardening, make funky furniture for local art fairs, or rent the guest room in your home as an Airbnb host. Search online for "side hustle ideas" to get started.

Is now the time to ask for a raise at work that you feel you deserve?

Do you have some budget busters? If so, you’re not alone.

Based on research from Principal®, Americans say they spent more than they budgeted in 2019 in these areas: Dining out (27%), food/groceries (24%), entertainment (19%), clothing/apparel/shoes (16%), and vehicle expenses (16%).

They considered their top financial blunders last year to be not saving enough (22%) and not budgeting properly (11%).

If you can set a budget now and develop good habits throughout the year, it can make a big difference in how you finish 2020.

If you’re considering a job or career change, will you have a higher salary? That could help you meet your financial goals faster. Well, if you don’t change your standard of living and put the extra income toward the college fund for your kids, the beach vacation with your friends, or the credit card you’re paying off. (Whatever your goals are.)

Next steps

The subject matter in this communication is educational only and provided with the understanding that Principal® is not rendering legal, accounting, investment advice, or tax advice. You should consult with appropriate counsel or other advisors on all matters pertaining to legal, tax, investment, or accounting obligations and requirements.

Insurance products and plan administrative services provided through Principal Life Insurance Co. Securities offered through Principal Securities, Inc., 800-547-7754, member SIPC and/or independent broker-dealers. Principal Life, and Principal Securities are members of the Principal Financial Group®, Des Moines, Iowa 50392.

©2020 Principal Financial Services, Inc.