6 Questions to ask yourself before making a budget for 2020

Before you get started on your 2020 budget, review last year’s to see what worked and what didn’t.

Before you make your budget for 2020, it’s essential to take a moment and look at your spending habits and behaviour in 2019. It’s easy to set fixed numbers, but in order to follow them, it’s important to first understand your money mindset, your triggers and patterns, and your motivations.

Here’s a list of retrospective financial questions that will help you reflect on your financial behaviour and improve it in 2020.

1. What are the five purchases I made this year that I regret?

A lot of purchases seem like a good buy at that moment, but it’s only later that you realise they don’t provide the kind of joy or utility you expected. There are also instances when we convince ourselves we need something when we really don’t. 

The purpose of asking yourself this question is to force yourself to recognise such purchases because it’s otherwise easy to forget and repeat them. These purchases can be big or small – it’s not about the money but the utility they provide (or, well, don’t provide).

Related: 7 Things I don’t regret buying

2. Which of my purchases this year can truly be classified as investments?

This question isn’t about conventional investments. It’s about the products and services you purchase, thinking they are going to add some value in your life, and hence spending on them is investing in that value. This question should be thought in terms of how much use you get out of something in comparison to how much you pay for it. 

For instance, if you spend about Rs 15,000 for a six-month gym membership, and work out multiple times a week, it can be classified as investing for good health. But if you only go to the gym once a week, you may just want to go for a jog or run in the local park instead. 

3. What are the 3 specific things I want to cut from my budget in 2020?

When answering this question, be realistic about what you can do without and what you can’t. It could be reducing the number of times you dine out in a week, or cutting back on alcohol when you eat out. 

The things you cut from your personal budget may be small, but the exercise will help you realise that it isn’t hard to let go of things that were initially a part of your routine. Also, over time these small cutbacks will add up and save you a significant amount of money. 

Related: 5 ways to assess your finances this New Year

4. When do I usually make most of my impulse purchases?

Nobody is immune from making impulse purchases, and that’s okay. But it’s important to determine what your trigger points are. Maybe you shop when you’re feeling low for the benefits of retail therapy. Perhaps, it’s when you see your friends or co-workers buy a new gadget or plan a trip that you feel inclined to so the same, even though you don’t really need it. 

Once you identify your trigger points, you can think of actionable ways to avoid making impulse purchases. For instance, maybe when you’re feeling low, you can indulge in an activity such as going for a drive or calling up a friend instead of shopping. 

5. Did I set a specific saving goal last year and meet it?

Think about all the things you wanted to do in the past year. Maybe you wanted to go to Italy on vacation or buy a new car. While you may have been saving for each, did you have a specific amount in mind that you were actively working towards? 

It’s essential to list your major savings goals for the new year and have a concrete figure for each. This will give you a big picture of all the areas where you need a significant amount of money. You can then plan and work towards it accordingly. 

6. What is the one way in which I can increase my income in the next year?

While saving and budgeting are important, it’s also necessary to think of ways in which you can diversify your sources of income. Whether it’s through a side hustle such as taking up freelance projects in your free time or focusing on building your net worth through investments, this is one question you need to think about. 

Related: Clueless about investing in stock markets? Here are some options

All these questions primarily help you answer the ‘why’ of your financial behaviour. It’s only when you’re aware of something can you change it. In addition to these questions, you may see some other patterns that you may want to address. It’s all about being honest with yourself – after all, you have to action your budget and not just plan it. Check these 7 Money mindset shifts to adopt in 2020.