You Know How To Budget, But What Comes Next?

The importance of having—and sticking to—a budget is no secret, and there are plenty of resources available to help you get started. However, once that budget is created, what comes next?

You’re going to experience changes throughout your life, and your budget should reflect those shifts, whether planned or unplanned. For example, your income might increase because you took a new job or perhaps earned a promotion, which now means you have additional funds to consider when planning.

Or, you might decide to take a family trip next summer, which means you need to adjust how much you’re saving and cut some other spending back a bit. These shifts are common and your budget should help you balance them out so you can maintain your forward momentum toward your other financial goals, such as saving.

Remember, your budget is a living document, and the more you cater it to your lifestyle the more reliable it will be. And while this takes practice, here are some tips to keep top-of-mind as you take a deeper dive into your budgeting skills.

Make sure your budget is working

The first few months (or maybe even a year) of spending and saving according to your newly established budget means you will likely come across some kinks. Not to worry. Kinks are normal and can help you iron out the details until your financial behaviors are seamless.

From time to time, it’s important to take a step back and consider what’s working and what isn’t. Whether you find your budget is not detailed enough, or perhaps it is more detailed than it needs to be (yes, this can happen). If you need to make more room for an expense you previously thought was allocated for, then do so. If you find you are spending less in an area than you planned on doing, then trim where it makes sense.

The important thing to keep in mind is that when fine tuning your budget, trial and error should not be problematic. Adjust where needed, and don’t think of it as reinventing the wheel, rather, tightening the spokes.

Reevaluate your financial plan

Goals should absolutely be part of your budget. And as you dive deeper into your budgeting you should establish accurate timelines for reaching these goals. However, as time goes by, you should reevaluate these timelines. There are other factors that might change in your life, which might impact your ability to reach these goals, or at least the timeframe in which they are attainable.

For instance, if you have a goal to purchase a home and are saving toward that goal, you should already be allocating a certain amount of your income from each paycheck to growing that amount. But what about if other areas of your budget free up? What if you’ve been paying down a credit card until you successfully do so? Instead of making a celebratory purchase, consider shifting the amount you were putting toward that credit card toward your goal of purchasing a home. This will help bring your home closer to a reality.

Think beyond your wants and needs

As your budget evolves to match your lifestyle, you might have a change of heart regarding your wants from your needs. Needs are those payments you absolutely must stay on top of, such as debt or living expenses. Wants, of course, are those items in your life that bring you joy. Both are important, but there should be a third category as well, which is savings.

After getting used to living within your budget and understanding where you have flexibility, start allocating more toward your savings. After all, the point of the budget is to lead yourself to financial soundness, so as you start to adjust your numbers, trim down your debt, and bring your wants closer to reach, make sure you are upping your savings allocation as well.

Find your rhythm

As mentioned, after sticking to a budget for some time you’ll start to notice room for adjustment. Additionally, you might also become aware that your timelines (eliminating debt, savings deposits, etc.) might not be best representing your lifestyle.

For example, if you began by establishing a monthly budget, then your efforts are accounting for that entire month. This might work fine for you, but if your paychecks are irregular (maybe you work on commission or rely on tips) then perhaps setting a budget for a more immediate or focused time period is better.

There is no standard budget timeline that you should adhere to; it’s simply the timeline that works for you. So if you get paid every other week and have different expenses in those weeks, then break your budget up in this way as well. This isn’t to say you can throw your calendar out the window, but you know your schedule better than anyone else, and keeping track of your expenses might be better off on your own terms.

Categories can be tricky

You’ve likely noticed by now that a budget is easier to organize when your expenses are lumped into categories. It’s fair to assume you’ve also noticed some of these expenses fall into a bit of a gray area. Not just the distinction between what’s necessary and what’s not, but your scale of importance and what matters today might be less important tomorrow.

What is important to remember is that organization is key, but being too detailed and rigid with these categories can be problematic. In fact, this forced organization can even be less effective.

There are a few tricks you can try to keep your budget working, and your sanity intact. For example, if you have a limit on your day-to-day expenses, such as lunches or coffee or maybe a cab fare instead of waiting for the bus, try allocating these expenses to a cash budget.

By having a limited amount of cash set aside for these types of “everyday” expenses, you will be able to visually track this spending and stay within your limit. Using cash in this way can help give you a better perspective of the overall picture and keep you from getting too focused on fitting these types of expenses into a category.

While cash might seem old fashioned, it can be a great way to track small expenses that when kept in check shouldn’t impact your budget too much. After all, small expenses add up, so be in control of them as best you can.

Never stop saving

The most important thing about sticking to a budget is making it work for you today, but also tomorrow. Continue fine tuning so you can get closer to reaching your goals, lowering your debt, and maintaining your regular expenses. But it is equally important to never lose sight of saving.

Save for emergencies, for your goals, and for your future. You can always do a better job when it comes to budgeting, and this improvement should lead to better saving. Get started today to make sure you are on the right track to achieving your financial goals.

Ready to start saving? We have a variety of savings solutions to help.

 

 

Sources:

“How to Make a Personal Budget in 6 Easy Steps,” The Balance, November 2020

https://www.thebalance.com/how-to-make-a-budget-1289587

“Why Your Budget Doesn’t Have to Be as Detailed as You Think,” Workable Wealth, July 2018

https://workablewealth.com/2018/07/11/your-budget-doesnt-have-to-be-detailed/

“A Deeper Look at Proportional Budgeting,” The Simple Dollar, December 2018

https://www.thesimpledollar.com/financial-wellness/a-deeper-look-at-proportional-budgeting/