6 Changes You Should Make to Your Budget
Written by
Crystal Mayer
Edited by
Molly Sullivan
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Budgeting is an important tool to help you achieve financial stability. Whether you are just starting out or established your budget years ago, you will want to make sure to avoid common mishaps that can keep you from achieving your money goals.
The most important thing is to make sure that you choose a budgeting system that works and is easy to follow. Routinely reviewing your budget and making necessary adjustments is key, but other modifications may be just as important.
Here are six changes you should make to your budget now to ensure success in the future.
Plan for the Unexpected
Most people know that a budget should account for all income and expenses, but many people fail to take unexpected expenditures into consideration. Their budget only lists known costs such as their mortgage or rent payment, car loan, utilities and groceries.
If your budget does not include some cushion for things like home repairs, flat tires, medical bills or other surprise costs, you could have to dip into your savings or even pay with credit cards.
According to new research from Empower, 37% of Americans cannot afford an emergency expense over $400. Even more concerning, 21% of respondents reported having no emergency savings at all. This means 1 in 5 Americans would struggle to pay for unplanned expenses.
Building these potential costs into your budget and having an emergency fund can help ensure a sudden bill doesn’t cause chaos to your financial situation.
Don’t Set It and Forget It
Another mistake many people make is not reviewing their budget regularly. Life changes happen to everyone — from job loss to buying a new home, your finances and life goals will likely evolve over time.
Failing to update your budget or at least review it periodically to ensure you are still on track could set you back. Audit yourself and make adjustments as necessary. Working with a financial planner can also help you make sure your budget aligns with your current and future goals.
Automate Your Savings
An easy change you can make immediately is to automate your savings. Doing this can help prevent you from spending money that you had hoped to set aside.
The process is easy and usually free through your bank account. Many banks even offer incentives for automatic transfers.Â
Set Goals and Celebrate Them
Setting a budget is about more than just writing out your income and expenses; it’s about making a plan for how to allocate your money. Whether you realize it or not, by establishing a budget, you are setting financial goals.
Make sure that these goals are clearly outlined and celebrate them as they are achieved.
Don’t Overcomplicate Things
Another budgeting mishap that can bog people down is if the method or process is too complicated. Your budgeting plan needs to work for you. It needs to be simple enough to follow and stick to.
If you have to enter expenses in too many places or you have too many categories, it may be challenging to adhere to on a regular basis. Keep your budget and the process of budgeting easy to understand and follow. You can use an app or a basic spreadsheet to track your income and expenses.
Don’t Settle for a One-Size-Fits-All Budgeting Method
Finally, don’t fall for a one-size-fits-all budgeting method. You may need to explore a bit to find the system that works best for you and your financial goals. Influencers worldwide swear by many different methods, but these are not always realistic for every person. Choose a system that makes sense and is achievable.
If, for instance, you live in a state with a high cost of living and exorbitant housing prices, you may need to spend more than 30% on your mortgage or rent payment. A financial advisor can help you decide which one may help the most and how to modify it for your specific circumstances.
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