Let’s be honest: Few people jump for joy when they receive advice to rework their budgets. It’s not necessarily how most people want to spend a Saturday afternoon if given the choice. However, there are a couple compelling reasons why it’s worth taking the time to do so.
Having an accurate framework to evaluate your income vs. your expenses is a must when it comes to working toward your financial goals. If you want to reap the benefits of proactive money management like growing your savings and paying off debt you’ll need accurate numbers upon which to base your financial decisions. The other silver lining is that budgeting apps and the like make it simpler than ever to tweak the numbers, so you can generally rework your budget and go on your merry way without too much trouble.
There are certain times in life when it pays to rework your budget. Here are just five.
When Your Income Changes
Whenever your income changes, it’s time to update your budget to reflect the current state of affairs. This is true whether you’re laid off, receive a bonus, earn a raise or start a new position. And, for the many gig economy workers who see fluctuating income, you’ll need to revisit your budget a bit more frequently or perhaps base your budget on an averaged income.
Particularly if you receive a raise or bonus, it’s easy to forgo including it in your budget, instead thinking of it as extra money for you to spend how you’d like. The good news is you can reward yourself and revamp your budget to reflect your new take-home pay which in turn means you’re more likely to devote some of those funds to beefing up your emergency fund, paying down debts, increasing your savings and contributing to your retirement fund.
When Your Marriage Status Changes
Marriage and divorce evoke very different sentiments, but they do share one thing in common: They both have associated expenses. You may even be going from budgeting for one to budgeting for two, or vice versa. These two milestones implore us to deeply consider how we’ve been operating our finances and how those practices will be changing as a result of life change.
Be sure to discuss how you plan to handle finances with your partner if you’re getting married. Some couples opt for joint accounts, some separate finances completely and yet others come up with a workable combination of both. Whatever you decide, make sure you’re on the same page in terms of spending and saving to avoid miscommunications.
When Your Living Situation Changes
Moving across town? Across the country? Across the world? Going from an apartment to a home? Whatever the situation, your living expenses will change which means it’s time to update ye olde budget. Your rent or mortgage will change, as will utilities and insurance expenses.
Before the Holiday Season
Most of us have felt that end-of-year financial crunch due to holiday-related traveling, gift buying and event attending. Luckily, there are ways you can skate through the holiday season smoothly without totally blowing your budget. Anticipating these expenses ahead of time and tucking away funds into a designated saving account throughout the rest of the year goes a long way.
It’s also smart to optimize your budget ahead of the busy holiday season. Andrew Housser debt expert and co-founder of Freedom Debt Relief recommends going over your monthly bills looking for opportunities to save on recurring charges. He notes consumers may uncover significant savings by streamlining their entertainment expenses and canceling any memberships/subscriptions they hardly use. Once you plug these improvements into your budget, you’ll have more money available just when you need it most.
After Accomplishing a Financial Goal
Did you just accomplish one of your financial goals? High five! Now it’s time to decide how to redirect the funds you were previously funneling toward that goal. Setting up a goal-oriented savings account into which you make auto deposits from your paycheck can help simplify this process.
There are many times in life to rework your budget basically anytime something changes.
I’m a 20-something stay-at-home mother and wife. I have an amazing husband, a beautiful daughter, two loving dogs, and a lazy cat. I wouldn’t change my life for anything! I love to read, listen to music, cook and blog!
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