I’m a Financial Advisor: Here’s How Often You Should Adjust Your Budget
A personal budget is far from being a “set it and forget it” tool. Instead, staying on the right track and reaching your goals requires regular evaluation and adjustments — but the timeline isn’t the same for everyone. How frequently should you fine-tune your budget to reach your financial goals?
We spoke with a financial advisor to get a better understanding of the ideal frequency for tweaking your budget.
What Are Some Reasons To Adjust Your Budget?
Ross Loehr, a certified financial planner with The Sovereign Investor, said, “Adjusting your budget is essential to stay in control of your finances and adapt to life changes. Some reasons to adjust your budget include changes in income, unexpected expenses, lifestyle shifts or when financial goals evolve.”
What Is Your Standard Recommendation for Budget Adjusting?
“As a standard recommendation, I advise individuals to review and adjust their budget at least once a month,” said Loehr. “Monthly adjustments provide a timely assessment of spending patterns, help address any deviations and allow for proactive planning to achieve financial goals.”
What Are the Steps To Adjust Your Budget?
Loehr said that you should start by analyzing your income and expenses from the previous month.
“Identify areas where you overspent or underspent, and reallocate funds to align with your financial priorities,” he said. “Make necessary changes to accommodate life events or future goals.”
Should You Adjust Your Budget More Than Once a Month?
“There may be times when life events or significant changes occur, such as a job loss, a major purchase or a new addition to the family,” Loehr said. “In such cases, adjusting the budget more frequently than the standard recommendation can help manage immediate financial challenges and stabilize the financial situation.”
Can You Go Longer Than a Month?
“On the other hand, if you experience minimal financial changes or have a stable financial situation, adjusting the budget less frequently might be sufficient,” Loehr advised. “However, it’s essential to stay vigilant and review the budget whenever significant life events or financial goals arise.”
How To Stay On Track With Your Budget
To stay on track with your budget, Loehr recommends tracking your expenses regularly, using budgeting tools or apps, and setting clear financial goals. Additionally, he said to practice discipline, avoid impulsive purchases and establish an emergency fund to handle unexpected expenses.
“Regularly reassessing your budget and staying committed to your financial plan will lead to greater financial security and success,” he said.
How To Streamline Your Budget
Streamlining your budget will make it easier to stay on track. Here are some suggestions to consider when you adjust your budget every month or so.
Prioritize Essential Expenses
Always prioritize expenses for needs over wants. These needs include housing, utilities, groceries and insurance, along with healthcare and child care.
Cut Discretionary Spending as Needed
If you find that your budget is tight, evaluate non-essential expenses like entertainment, dining out or subscriptions, and cut some of these expenses temporarily (or permanently) as needed. Some people choose to do a “no-spend” month, which means you don’t spend money on anything but essentials.
Negotiate Bills and Services
Set aside some time to contact your providers and negotiate better rates for recurring bills like cable, internet or insurance.
Increase Income Streams
Consider a side gig like freelancing, part-time work or online selling to boost income and improve your budget’s flexibility.
Revise Your Savings Goals
Reevaluate savings goals when you experience an increase in income. Prioritize building an emergency fund or paying off debt for greater financial security.
Refinance Loans and Mortgages
Consider refinancing loans and mortgages to secure lower interest rates or extended repayment terms, reducing monthly payments.
Consolidate Debts
Simplify finances by consolidating multiple high-interest debts into a single, lower-interest loan.
Seek Alternative Transportation
Save on fuel costs by carpooling, using public transit, biking or walking.
Reevaluate Insurance Coverage
Periodically shop around for insurance policies to find suitable options at the best rates.
Think of Your Budget as a Work in Progress
Your budget is dynamic and requires periodic evaluation, adaptability and creativity. Utilizing these strategies will help you confidently navigate the changes in your finances and maintain stability.
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