When & How To Overhaul Your Budget

The only constant in life is change.

And if you’ve been “adulting” for any period of time, then you absolutely know this to be true! Significant others change, jobs change, housing changes, diets change, and even your body changes. What you started out with as a major in college could become something you never go near in your job 10 years later.

It’s all part of the ebb and flow of life, and to succeed, you have to be able to flex with the changes.

Your budget is kind of like your house in determining when it needs an overhaul.

For example, we just overhauled our kitchen, but it was because of several different factors: redoing it would help our earning/saving potential in the future, we could do it for very little money, and our current kitchen just wasn’t working.

Your budget is just. Life changes often mean that budget changes need to happen to. I’ve been there many times during my short time in adulthood, so I’ve compiled my best tips for determining when your budget needs an overhaul, and what changes you need to look out for in each scenario.

A Change In Income or Jobs

Now more than ever, adults change jobs every few years, rather than putting in 40 year with the same company. This is good, in my opinion, since it makes you well-rounded and happier, but it can take a toll on your finances.

Hopefully, you’re getting a raise each time you chance jobs, but whether your income is increasing or decreasing a new job means a different paycheck, and therefore a new budget is necessary.

{Don’t yet have a budget? You’ll want to start here to create one in 5 easy steps}

Watch Out For: Your expenses as related to your income. If your income increased, you’ll need to find something to do with the excess income every month (hopefully you save or invest it!). If your income decreased, then you’ll need to take a hard look at your expenses and find places to cut. If that proves difficult, you could also look into ways to make extra money.

A New Loan

I don’t say this to encourage you to go and take on more debt, but a new home, an investment property, or even a reduction in those same loans makes it time for a budget overhaul. If your payments have gone up, you need to figure out where that extra money is coming from, and if the payments went down (yay for you!) then you need to make responsible decisions with that extra bit of money that’s not already spoken for each month.

Watch Out For: Increased expenses associated with the loan payment, as well as the costs of the interest on the loan over time. If the new loan is a mortgage or auto payment, you could also have increased insurance costs! Before you take out a new loan, be absolutely sure that this is what you want to do!

A New Family Member

Did you welcome a new baby? Time to see through the joy to the more practical side of expenses associated with a new baby.

New babies can be expensive if you let them, and some the expenses may be some you didn’t see coming. If this is the case, then you guessed it: you’ve got to overhaul your budget!

With a new baby, not only do you need to account for things like medical bills, clothing, and food, you also should leave a buffer every month for unexpected costs. Believe me, you will have some!

{How We Got 2 Years of Diapers for Free!}

Watch Out For: Extra set monthly expenses such as funding your child’s college fund, monthly doctor’s appointments, and even diapers you can pretty much account for with set amounts in your budget. But beyond these, make sure to leave a buffer of extra money each month for unexpected expenses such as medicines, clothes, toys, and other baby gear that can really make your life easier.

{Here are 27 cool ways to get free baby stuff worth $2,889}

Moving

If you’re moving locales, your cost of living is going to change, and you may not know by how much until you’ve been in your new city for a while. Unfortunately, there is not a whole lot you can do about the costs and adjusting to them, but you CAN keep an open mind with regard to your budget and adjust monthly for the first few months after moving.

If you want to get a jump on the difference, check out this cost of living calculator. It’s not 100% accurate, but it can give you a very good idea about the costs of living in your new locale, so you can put together a budget that is the result of an educated guess, rather than wild assumptions.

Watch Out For: Expensive moving costs. Quality movers are well worth the price, but shop around for both reviews and prices to be sure you’re getting the best deals. Ask for any and all discounts, and be sure to get everything in writing! Before you get caught up in the busyness of moving, try to create a mock-up budget with a clear head so you won’t be blindsided.

When You Feel Constantly Frustrated

One of the biggest indicators of a budget that’s not working for you is constant frustration. The beauty of budgeting is that if you stick with it long enough, it will eventually work. Not all budget categories will always work, but eventually you’ll start to see budget wins.

They’ll start slowly, one category at a time, until slowly but surely you start to have more wins than losses.

It’s a struggle, to be sure, but it’s also encouraging as you start to take back control over your money.

If, after several months you’re not seeing ANY wins, you might have set up an unrealistic budget, and it’s time to sit down and completely overhaul it with realistic amounts and expectations.

Watch Out For: Budgets that are set too low for you to actually adhere to. Often, when you’re trying to reduce your expenses, you can get over zealous and set expectations that are too high….also known as a budget that is too low. Be realistic with your budget, even if your expenses are too high. Try reducing your spending slowly over time to avoid the feelings of frustration and failure.

{Be realistic. Here are some of my favorite ways to save money at the grocery store without clipping coupons}

Take Into Account How You FEEL About Your Budget

It’s important to feel right about your budget. When you first start out, you should feel like you can stick to it with no problem. In fact, it should be a bit of a challenge because you probably started budgeting because of financial problems.

Then, as you start to navigate the new budget waters, you’ll still feel challenged, but equipped to take on the challenge. At no point should you feel angry, incredibly frustrated or other severe emotions for your budget. Take a peek at these questions to give you a clue as to whether your need to overhaul your budget:

Do you dread budgeting sessions? Why?

Do you feel your budget is disorganized?

Under your budget, what can’t you spend money on?

Do you and your significant other fight about your budget?

A budget only works if it has been set up specifically for you. In order for it to work you have to feel challenged and no more. If you don’t, your budget will cause more frustration than good, which means it’s not working.

How To Overhaul Your Budget

If you’ve discovered from above that you do need a budget overhaul, I’ll walk you through how exactly to do this.

It is important that as you go through this process a) you commit to being completely honest with yourself and b) you use a method that works for you. Some people prefer the pen and paper method, some prefer all computer programmed, and others are somewhere in between. Whatever you choose, it needs to be comfortable and doable for you. Don’t dive in with software you don’t know, and if you’re a spreadsheet savant, don’t go the pen and paper route.

The 5 Basic Steps to building a budget are:

Determine How Much You Normally Spending
Factor In Your Take-Home Pay
Add In Fixed & Necessary Expenses
Write In Discretionary Spending
Find Ways to Cut/Make Extra Money

I’m not going to go into great depth with the 5 basic steps, because I’ve already written a very in-depth resource which you can find here: How To Create a Budget.

Check out that resource to overhaul your budget if it needs it. Done correctly, an overhauled budget will not only be a pleasant experience for you, your budget will start to work.

After all, that’s what a budget is for: to work for you to help you take back control of your money. Don’t waste time: if your budget needs an overhaul, make it happen today!