Why isn’t my budget working?
New Year, New Start…right? Many people have decided to get their finances in order this year. And what better way to do it than to create a budget. But what if your budget isn't
actually working? What if you’re spending more than you had planned in categories…or what if you forgot some things and don’t have a category for them? These are common concerns and fears of creating a budget.
Here are 4 things to remember when creating your budget:
1. It usually takes 3-4 months before your budget begins to click.
But even then there may be annual items that you forgot to account for in your budget. This is one reason that I have a Miscellaneous category in my budget. This category accounts for the little spending or one-offs that you may have each month.
2. It’s okay to make changes mid-month.
I have been budgeting every month for over 13 years now and I still change my budget and amounts mid-month constantly. This is not a document written in stone, this is a budget that can change as things come up in your month.
3. But still make sure you budget to Zero.
If you add money to one category, you must take it from another. If you make more money, you must add the additional to a category. The bottom line must always be zero. This is how you don’t spend more than you make.
4. The numbers can start with estimates, but must end with actuals.
It is okay to estimate your category expenses at the beginning of the month. However, as expenses are paid, you need to update your budget to actual numbers. Think electric bill…estimate at top of month is fine, but when you pay it, update the numbers.
As one of my clients recently said that she was surprised by their budget, it made them realize that they do have enough money, they were just spending it wrong. Having a budget will allow you to plan your month ahead of time, while you can still make changes instead of just reacting.