5 Signs Your Budget Needs a Makeover (And How to Do It)


You've been trying to use a budget, but it isn't going so well. Don't give up just yet: Before you throw in the towel, see if any of the following five issues (and remedies!) might pertain to your situation. If so, a budget makeover may be in the cards.

1. You keep busting your budget

The first step in creating a budget is setting targets for each spending category — how much you'll save, give, and spend on everything from groceries to gifts. If you're new to budgeting, it's pretty common to get to the end of a month only to discover how drastically different your real-world spending is from your planned spending.

Don't despair. Either you set unrealistic targets, or there may be ways to better manage your spending. Very likely, making your budget balance will require some of both.

What to do? Give yourself some slack. See the first few months of using a budget as a time of learning. If you're tracking your spending for the first time, this is a great opportunity to find out how much you really do typically spend in each category. Don't beat yourself up about it; learn from it.

In some categories, such as groceries, there's a certain reality to how much it costs to feed a family your size. If you're a family of five, $400 a month for groceries probably isn't enough. In other categories, there may be opportunities to be more intentional and creative in finding ways to spend less.

Accept the fact that it usually takes several months to figure out realistic spending targets and build new money-saving spending habits. (See also: Stop Using These 5 Excuses Not to Budget)

2. You don't realize you're busting your budget until it's too late

A common budgeting mistake is only reviewing how you're doing at the end of each month. By then, it's too late for course corrections.

An important key to successful budgeting is managing to the numbers. That requires looking at how your actual spending compares to your planned spending throughout the month. Before heading to the grocery store, it helps a lot to know how much of this month's food budget you've already spent. If it's getting tight, you can focus on buying only the essentials.

It's the same with every category. Knowing where you are with your entertainment budget can help you make budget-appropriate plans for the weekend. Got plenty of room left? Make dinner reservations at that new restaurant you've wanted to try. Getting close to your limit? Rent a movie and stay in. (See also: 5 Common Budget Mistakes You Can Fix Right Now)

3. Maintenance and repair costs are busting your budget

Two expenses that commonly catch people by surprise are home maintenance or repairs and car maintenance or repairs. Many people don't even have these categories in their budget.

While expenses vary, depending on the age and condition of your home and car, some good general guidelines are to budget $75 per vehicle per month and $200 per month for your home. Some months, you'll spend far less in these categories, but some months you'll spend a lot more. Putting these amounts in your budget will help make sure you have money available when the need arises.

In those months when you don't spend your full budgeted amounts, you could let the money build up in your checking account. Or, consider them periodic expenses, as described next. (See also: Where to Find Emergency Funds When You Don't Have an Emergency Fund)

4. Periodic expenses are busting your budget

Everyone has expenses — sometimes, big expenses — that don't occur every month, but do occur sometime throughout the year. Examples include an annual life insurance premium, a semiannual vehicle insurance premium, vacations, and end-of-year holiday gifts. If you haven't planned ahead, they can really mess with your budget.

To avoid that, estimate how much you're likely to spend in each periodic expense category on an annual basis, divide by 12, and transfer the total of all such expenses into a dedicated savings account each month. That will help ensure the money is there when needed. (See also: Stop Making These 7 Basic Budget Mistakes)

5. Your spouse is busting your budget

With many couples, one person is usually more interested in using a budget than the other. It's OK for that person to take the lead in designing and managing the household budget. But some budget-minded spouses take this too far and leave their spouse out of all budgetary matters completely. That's a recipe for a busted budget, and probably a lot of arguments.

After all, how can a spouse who had no say in deciding how much to spend on groceries or clothing or anything else be expected to manage to those numbers? That's why it's important to make sure you're on the same page as your spouse. Work together to decide what financial goals to pursue and how that translates into monthly spending priorities. (See also: How to Put Your Spouse on a Budget Without Ruining Your Marriage)

Wrapping up

Budgeting is not a perfect science. Goals and circumstances change, so build in some flexibility and grace, and give it some time. Expecting to hit some snags along the way can help you stick with your budget long enough to get it running smoothly.

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