Splurging on one too many new decorations or getting wrapped up in spending on your loved ones can happen to the best of us. Fortunately, there’s no time like the present to get back on track.
If you realized you overspent after the holiday magic settled, here’s how to recover and reset your budget for the new year:
Step 1: Determine which accounts need your attention
The first step in your financial reset is to determine where the funds came from. Did they come from savings or were they put on a credit card? Start by reviewing your account statements to get a clear picture.
If you’ve accrued credit card debt, your plan should include paying it down before replenishing savings. Focus on the highest interest cards first so you can minimize any additional fees. Smart spending tools like Ally Bank’s spending buckets can help you maintain a consistent payment schedule and stay on track.
Once you’ve chipped away at debt and are ready to rebuild your savings, figure out what you can set aside each month to work toward your goal. This can include reducing your expenses, which we’ll cover in step two, and establishing a new budget - step three.
Step 2: Find opportunities to reduce expenses
Much like with your overall health and wellness, January is a great time to re-evaluate and refocus. Determine where you can cut expenses and redirect that money toward paying down debt and boosting your savings. Assess areas such as:
Utilities: Call your service providers to see if you're getting the best deals possible. Many bundle services and rates to retain customers.
Things you could sell: The new year is a great time to purge and reduce clutter. Are there items in your wardrobe or garage that are worth selling?
Non-essentials: Would public transportation be an option over a ride sharing or parking? That movie on a couch is way more comfortable than the theater.
Subscription services: Are there any you could pause or cancel completely? Consider options at your local library in lieu of streaming services.
Bonus: Consider a No-Spend Challenge for the month of January and reallocate any extra cash to your holiday debt.
Much like with your overall health and wellness, January is a great time to re-evaluate and refocus. Determine where you can cut expenses and redirect that money toward paying down debt and boosting your savings.
Step 3: New year, new budget
Now it’s time to set a new budget that is aligned with your long-term and short-term goals. There are plenty of ways to think about creating a budget, but at a high level, your new budget starts with understanding:
Net Income: This is the amount you take home after taxes and other deductions and includes any irregular income.
Total Expenses: Categorized into fixed (rent, loans, utilities), variable (groceries and transportation) and irregular (think subscriptions or insurance payments).
The Balance: Subtract your total expenses from your income.
This is also a good time to think about your new year’s financial resolution and how that fits into your plan. Not sure what resolution to make? Take our quiz to find the right one for you.
Read more: How to keep your expenses on track with spending buckets
Step 4: Start planning your 2026 festivities
To help avoid overspending again, start thinking about what will be important to you next season – gifts, parties or holiday outings? Consider how much you want to spend on each, layer it in your new budget and allocate a certain amount every month to help reach your savings goal.
For additional ways to avoid overspending next season:
Set a realistic (and strict) budget for your holiday savings goals, even allocating a little extra for last-minute purchases.
Make a list before you shop and stick to it.
Take advantage of sales, discounts and cash-back offers throughout the year.
Be mindful of social media use – influencer deals, promotions and ads can be tempting, but being prepared with these smart spending habits can help you avoid common spaving pitfalls.
Step 5: Begin saving for your new year & new goals
Now it’s time to put it all together and save for your new goals. When thinking about the future, use visualization to help achieve your goals:
Build a Pinterest board, vision board or other tangible item to help envision your goals
Break your vision into individual savings goals
Monitor your progress to keep you motivated
Ally Bank Savings Account buckets make it easier to visualize your goals and reach them faster. Automated boosters like recurring transfers regularly move funds from your checking account to savings, and Surprise Savings analyzes your spending habits to find ways where you can save more.
Keep things merry and bright
No one enjoys the consequences of overspending. Fortunately, if you find yourself in post-holiday debt, these simple steps can help you recover while preparing for the next holiday season.
