Budget reviews. They seem to be one of those universally disliked tasks. As unpleasant and dull as the work might be, it’s super important to keep track of your budget to maintain your financial health. We often find it hard to review our budgets because we don’t know when – or how – to do so. How are you supposed to know when it’s time to reevaluate your budget?
We’re all on different financial paths, meaning our budget reviews will all fall at different times. However, we can all relate to some common elements of proper budgeting to guide us.
How do you reevaluate a budget?
First of all, what does it even mean to reevaluate your budget? It’s a bit more involved than just doing a quick skim of your bank account every once in a while. You want to treat your budget like it’s a living, breathing thing and something that changes constantly.
Here are a few tips that can help guide your budget review. If you had plans in terms of what you wanted to spend during a specific time period, you can compare that to what you actually spent. This will mean keeping track of your spending, which is definitely something you should do anyway! So, what did you spend and what did you save? Were you on track with your plans? Ask yourself these questions as you review and answer honestly.
It would be best to have some financial “goals” that determine what you hope to achieve with your money. Remember these goals as you track your expenses and income and see if any modifications are needed to get there. Don’t feel discouraged if you find you need to work more on saving and spending less. Or maybe you found you’re on track and don’t need to make any big changes – if so, good job!
Should you review monthly or yearly?
Now that you know how to do a basic budget review, you need to figure out when it’s actually necessary for you. Some people say you should be looking at your budget every month, or even every week, while others say an annual check-in is sufficient. That answer depends on your situation!
Yearly review
If you’ve settled into a predictable routine in terms of your finances, a yearly review may be all you need. This means your job and income have been the same for a long time, and you don’t expect them to change. It also means you consistently have the same expenses and other payments to take care of – basically, your financial situation is very predictable. In this case, there might be no need to do a monthly check-in, but there’s certainly no harm in it either.
Monthly review
There are some situations in which you should reevaluate your budget monthly. If you’re one of the many people whose spending varies each month, you should check in with your budget more regularly. Lots of us have a more month-to-month spending schedule, as our expenses and incomes vary. This might be the case if you work unpredictable hours, or your utility bills tend to change often. This means the budget that worked for you six months ago might not be relevant today. Make sure your budget always reflects your current financial situation!
Always review when…
Some circumstances always warrant a budget review. Here are a couple of the biggest times to reevaluate your budget.
You’ve experienced a big financial change
Since your finances are never guaranteed to be static, neither should your budget. If something big happens to impact your finances in any way, it’s important to check your budget. For example, maybe you have a new employer that pays more or less than your previous employment. Perhaps you’ve been laid off and need to make sure you have enough savings to keep you going for a while. You may have recently moved to a more or less expensive area, or just moved in with your partner and now have a double income.
You’re planning on future expenses
If you know you have big expenses coming up in the future, it’s good to review your budget now and be prepared for those costs. You might be planning on buying a home and need a budget to accommodate a down payment and mortgage costs. You could also be expecting children or planning on paying for a child’s education. Even something like a vacation – when travel is allowed – could require a budget review.
What does your review mean?
Once you’ve reevaluated your budget, what do the results mean for you? It’s important to sit down and take some time to figure out how your budget will work into your life moving forward. If you find you need to increase your savings, think about how you might achieve this. The results might not always be what you expected or were hoping for, but it’s important to be honest with yourself in order to have the most success with your finances.
If you’re hoping to buy a home or refinance your mortgage this year and need help with budgeting, get in touch with me here!