KJ: Sometimes, it seems like money pours out of the bank account, so what better time to see if your current plan is really what is right for you at this stage in your life? It’s easy to keep coasting as is, but address it before it really gets out of hand, so you don’t keep saying, “it will get better” or “this is temporary.” How many times have you heard yourself speak those words only to realize that your “temporary” had actually become your new normal? What better time than now to take a step back from your regular budget and assess if your budget and goals you have set for you and your family are realistic? Life happens, life is always changing and I have built SO many spreadsheets over the years with projection after projection of how much we need to save for different goals we have. It never ceases to amaze me how much things can change over even short periods of time like six months or a year.
An appliance breaks and you suddenly need to replace it. A windfall comes your way from the lotto (er, not quite, but wishful thinking, right?). The budgeting and goal-setting process should be fluid with lots of feedback loops. Something changes (unexpectedly or expectedly), so it’s time to work on a new plan and reassess. Did your expenses creep up and now you have a higher emergency fund need (the double-edged sword of expenses where the more you spend, the more you need to save for your emergency fund for that 3-6 months living expense goal)? Yet, the less ability you have TO save to that goal by nature of spending more…sheesh…enough to make your head spin sometimes!
Here are a couple of trigger events for when you might consider adopting a new budget.
Did you reset your budget if you had a change in income?
Maybe you got a raise that allows you just a little more wiggle room each month or maybe quite the opposite happened – you got a pay cut. Sometimes you can’t plan around either one of these, particularly if your company goes through some tough times. While other times the pay cut may be voluntary, through one person deciding to stay home for the family, reducing hours to allow for more home/family/vacation time, etc.
A change in income is most certainly a great time to look at your budget, and in most instances, is best if you reassess your budget BEFORE you take that leap, as is the case in a voluntary change of circumstances.
Have you continued to find it difficult to meet your budget each month? Did you need to reset your budget because it wasn’t realistic?
Maybe your expenses just aren’t all that realistic. Budgeting is about forecasting what you think your expenses will be, and at times that means you’re just flat out wrong. You could be way over budget or way under budget in certain areas.
When we moved to our existing house after having lived in a town home previously that had residents on either side, we weren’t quiet sure what to budget for the cost of electricity for a single family home let alone what the lawn watering costs were going to be. Fortunately, we WAY over budgeted for those expenses assuming a worst case scenario increase in costs, and we have been pleasantly surprised that our bills weren’t quite as high as we thought they would be – even in the cold of the winter or the heat of the summer. What this has meant though is we often take the “under” on this area and reassign to other areas that need increases for those one-off items like birthdays, pet food every few months, etc. Maybe it’s time to give up some of the “over” in this category and permanently reassign to somewhere else once and for all.
The other component of this too is your costs may rise. Gas prices may shoot up, your electricity contract renews – yet the only options now are more expensive, your insurance costs go up, the costs of your regular groceries go up. Any of this sound familiar? Don’t just assume you have to immediately increase your total budget though – as it may be an opportunity to cut back elsewhere to keep your expenses in check. Gas prices rising may simply mean being more creative in the kitchen and eating out one to two less meals a month.
AJ For me, reassessing the budget feels like a massive undertaking. I’m awesome at maintenance and upkeep, but change is a major speed bump in my budgeting world. For my tracking purposes the last year has been a major challenge. When we bought our first house (the town house) we had major buckets and few fixed expenses with no maintenance or updates to make, so there was more breathing room in our budget. We used to regularly save more than planned in a year because we just didn’t need to spend it. These days our unexpecteds in life seem to cost a whole lot more and sometimes they don’t fit quite as nicely into my monthly plans. However, when we sat down to talk about whether we needed to increase our budgets in some areas to allow for increased expenses, we ultimately decided that these overages were temporary and we’re budgeted appropriately for the foreseeable future, so I get to rest easy and continue resisting change – at least until next month!
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Image courtesy of cooldesign / FreeDigitalPhotos.net.
When was the last time you reassessed your budget? is copyrighted by TheSimpleMoneyBlog.com without consent to republish.
Some of the links in the post above may be affiliate links. This means if you click on the link and purchase the item, we will receive an affiliate commission. We feel strongly about only recommending products or services we use personally and/or believe will add value to you, our readers. Read more about our commitment to providing quality product recommendations.