You’ve made your budget. Then, you forgot Christmas was coming and you want to buy gifts. Your A/C or heating bill went through the roof this month. The once-a-year bill arrives for the home owner’s association dues. You went out after work to grab a diet coke with some friends, and it turned into dinner, three glasses of wine, and an Uber ride home.
Budget busters – we’ve all had them. The best-laid plans can often get derailed for all kinds of reasons. Here are the best ways to fix your budget if you’ve gotten off track.
1. Take a deep breath
First is to recognize there is no perfect budget. That’s not an excuse for constant overspending though. The variable expenses in life – groceries, gas, utilities – mean you will always be a little over or a little under (preferably a little under) every month.
For example, you budgeted $500 for groceries and spent $493. Or you budgeted $200 for gas but gas prices went up, and you had to make an extra 2-hour drive somewhere, so it cost you $210 instead.
In other words – you’re human.
Welcome to the club.
Action item: Recognize where you are over/under for a month and adjust next month’s budget as necessary. It can also be helpful to build in some fluff to those budget categories where you might expect some overspending. If you end up with extra at the end of the month – hooray!
2. Forgetting to budget for things
I forgot to budget this year for the annual membership fee my new gym. It was $49 and not in the new 2017 budget. – Scott
See – eleven years of doing a budget and this stuff still happens.
And this was after Scott had spent 5–6 hours gathering all the paperwork and calculating out each budgeting category for 2017.
Action item: There are a few ways to handle unexpected expenses you forgot to budget for:
- Borrow money from another category (groceries/entertainment/vacation) to pay for the expense.
- Keep a Miscellaneous fund to pay for the expense. I budget $20/month for miscellaneous stuff like postage stamps or shipping.
- Pull money from a savings account to cover the cost.
Just make sure you avoid spending money you don’t have. If you have a fixed income, your finite amount of money is used to cover the expense.
3. Underestimating variable expenses
Looking at your bills for the past twelve months can give you an average monthly expense for things like electricity.
However, if a heat wave comes through with 30-days of 90 degree plus temperatures, the sun doesn’t care you’ve only got $100 to pay a $150 electric bill.
Action item: For categories with variable expenses that may seasonally increase, leave the extra in your checking account.
In the Spring if you’re electric bill is $75, and you’ve budgeted for $100, leave the extra $25 alone. Your budget will help you track where you’ve built up extra savings. You’ll know you’ve got an extra $25 that you can use later.
Pull money from savings or even your emergency fund to cover the difference. Whatever you do, avoid covering the expense on credit if you can’t pay off the bill in full when it comes due.
4. Splurge spending
It’s been a long day at work, it’s late, you’re driving home, and you don’t feel like cooking for the family. Drive-thru Chinese food from Panda Express is looking pretty good, even though it’s going to set you back at least $35 for a family of four.
But hey – you’re hungry. And tired.
Just this once.
Breaking the budget and splurging is normal. That’s not a free pass to blow it all the time.
Related: How to stop splurging and spend less
Action item: First you have to make up for the blown money. See if you can shift money from the grocery budget to cover eating out. Did you buy a new shirt instead? Try to find another variable category where you can make it up.
Next, re-work the budget to build in some fun money. When you’re paying off debt, it might take you six months or three years. That’s too long to go without a night out to celebrate your little wins along the way. In fact, you’re much more likely to give up on the budget and continue living paycheck-to-paycheck if you live a life of misery while trying to get ahead.
A good rule of thumb is $20/month per adult family member to have a couple Five Guys burgers (or one pint of Ben & Jerry’s ice cream each week) to keep you motivated.
Yes, you can. It’s not realistic to achieve all of your financial goals in the next 10-days. Or even ten months. But having a written spending plan will get you there in the fastest way possible.
Expect your budget to have some breakdowns along the path to financial freedom. Address the issue, get back on track, and keep moving forward.