If you care enough about your personal finances, you’ll likely already have a budget which you try to stick to. However, the various factors that affect our personal finances never sit still, and you need to be revisiting and adjusting your budget if you want to ensure it’s really working for you. In this post, we’ll guide you through the process of re-evaluating your personal budget.
List Your Goals
If it’s been a while since you revisited your budget, start off by asking yourself what your current financial goals are. These can change dramatically over time. For example, when you first drafted your budget, your main priority may have been getting out of debt. If you’ve reached this goal, you may have a large surplus of money you’ll need to redistribute. If you’re getting married soon, or have a new child on the way, this can also change your priorities dramatically. Whatever life has on the horizon, try to set at least one specific goal which you’ll work towards before anything else. Then, start putting at least ten percent of your income towards this goal.
Ensure your Budget is Bringing You Closer to Those Goals
After establishing a clear idea of your goals, you need to evaluate your budget and judge how efficiently it’s helping you towards those goals. This is generally very straightforward, but if you’ve experienced a sudden, unexpected change, like having to pay for an injury lawyer, your budget will have to change accordingly. Once you finally make the last payment on an outstanding debt, for example, and you have some extra cash to throw around each month, it’s important to keep saving your money, even though you may be able to increase your spending on other areas.
Look for Ways to Improve
One great financial habit that everyone could benefit from is looking for little ways to improve their spending habits. Almost everyone is guilty of overspending in one area or another. It’s important to keep re-assessing your spending habits, particularly in recreational expenses. Identifying your weaknesses, and developing the self-discipline to stop spending in these areas, is essential if you want to assure your future financial security. If you know you dine out too much, set a day of the week when you’ll cook at home. If you download too many movies, consider switching to a more cost-effective subscription service. Whatever’s draining your finances, identify it and plug it up!
Check it Monthly
Finally, get into the habit of revisiting your personal budget on a monthly basis. This will help you keep on top of any bad spending habits, and show you how well the changes you’ve made are actually working for you. You may find that you need to tweak a few categories in your budget and move money between accounts, but this monthly re-assessment shouldn’t take too long to complete. Your income, goals and expenses can fluctuate from month to month, and if you’re not adjusting your budget accordingly, you could be running straight towards a disaster.