5 Signs Your Budget Needs a Rethink

#1. Your income, expenses, or goals have changed.

These three things are the bare-bones basics of any budget:

• How much money you earn each month
• How much money you need to spend each month
• How much money you want to put into savings each month

You’re free to add other features as you please, but those are the fundamentals. A change in your income (such as starting a new job or getting a raise), a change in your regular spending (such as paying off a debt or adding a new expense), and a change in your goals (such as deciding to save for a home) will impact how you budget. Maybe now you can afford to increase the amount that goes into your savings account each month, or maybe you’ll need to cut your spending to account for your new expenses.

Don’t wait until things become problems: as soon as your finances change, make the changes in your budget to reflect them.

#2. You can’t afford it.

Some things are out of your control, and there might be periods where you’re in a tight spot, financial. But during ordinary times, if you find yourself:

• Living paycheck to paycheck
• Regularly spending more than you earn
• Frequently dipping into your savings
• Habitually relying on credit cards to cover necessary expenses
• Not being able to consistently put money (any amount) into savings

…then your current budget isn’t working for you.

Take a look at your budget and see why these things are happening. It could be as simple as setting up an automatic deposit into your savings account each month. Or, you might need to critically examine your spending habits and reallocate your monthly income.

#3. It’s too restrictive.

Keeping a specific, organized budget isn’t a bad thing. But budgeting yourself so tightly that you don’t have any wiggle room can lead to trouble later on. Do you have the emergency funds to purchase a new dishwasher or make unexpected repairs to your car or home? Or would you be forced to dip into your retirement savings or take out a loan.

It’s important to save and spend responsibly, but allowing yourself the leeway for an occasional takeout meal or latte won’t derail your financial future (unless you genuinely don’t have the funds for these things). When it comes to your budget, you should feel disciplined, not restrained.

#4. You’ve noticed some unfavorable patterns in your spending.

Some spending is inevitable. You know you’ll always need to spend a certain amount on things like rent, mortgage, utilities, bills, and groceries. Once you’ve taken care of the essential spending and your savings, you’ll hopefully have a bit left over for fun, frivolous, and miscellaneous purposes.

Take a look at your nonessential spending too. It’s normal to spend a little more than usual during the holidays, for example, but are you consistently going over budget on things like online shopping, nights out, or takeout food? If you’re spending more than you can afford on these things, it’s time to reassess: either reallocate your budget to account for more spending, or make the choice to reduce the amount you spend.

#5. You’re stressed.

Finances are a common worry for people all over the world. But if you’re constantly stressing about whether you’ll be able to pay your bills at the end of the month, or stay up late each night worrying about potential disasters that could empty your bank account, making some changes to your budget could help you to find peace of mind and feel more comfortable with your finances.

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