Having a budget is a great start. But life will always throw you changes, and with those changes comes the need to revisit—and perhaps reallocate—your budget. Maybe you recently got a raise, moved to a more expensive apartment, or bought a pet. All of these things would require a change in your monthly financial planning.
Besides those obvious changes, here are six other signs that might mean it’s time to check back in with your budget and recalculate so that it’s working optimally for you.
1. You Have Only a Few Bucks Left at the End of Every Month
If you’re barely scraping by each month with the budget you currently have, it’s probably time to revisit your plan.
How to Fix It: Unless the situation is dire, you can likely pad your budget by cutting back on your spending in certain areas, like groceries, entertainment, or gym memberships. If you are having trouble paying your bills, have no emergency savings, and are also in debt, it might be time to consider something that will save you even more each month—like getting a roommate, moving to a cheaper place, or giving up your own car for public transport.
2. You’ve Never Increased Your Retirement Investments
If you started saving the minimum for a 401(k) match at your company, that was a good way to get your feet wet. But if you’ve had a few raises since then, it’s time to increase what you’re putting away in your retirement accounts as well.
How to Fix It: Chat with your HR representative to see when and how to up your 401(k) contributions. If your company doesn’t offer a retirement plan, fear not: there are plenty of additional ways to save for your future. Evaluate how much you can and should save for retirement, and consider opening an individual retirement account (IRA).
3. You Can’t Come Up with $1,000
If you wouldn’t be able to come up with $1,000 if you needed it, at least take heart in the fact that you’re not the only one. According to a recent poll, two-thirds of people in the US would struggle to gather that amount. But now that you know you aren’t alone, it’s time to fix it.
How to Fix It: Putting money into an emergency savings account every month is a great way to ensure you have money to cover yourself if something bad happens in the future. Experts recommend having at least three to six months’ worth of expenses saved up in an account especially for emergencies.
4. You Aren’t Saving for Any of Your Future Goals
If you’re paying off your monthly bills, travel when you’d like, and even have a bit of an emergency savings started, that’s all good news. If you haven’t thought further down the line, though, now’s a good time to start figuring out how those goals could fit into your budget.
How to Fix It: First, determine the timeline for your goals. If you think your goal of buying a house or starting a freelance business is at least five years down the road, consider a Certificate of Deposit (CD), an account that often provides a higher rate of return than standard savings accounts but that requires you to keep your cash in the account for a certain period of time. If you might need access to your cash faster than a CD would allow, shop around for a savings account with the best rate.
5. You Use Your Credit Card More Than You’d Like
If you find that you often have to use your credit card to pay for things each month and then can’t pay off your bill, that likely means your budget could use a little rejiggering.
How to Fix It: Try going on a “cash diet” for a month to see if that curbs your overall spending. Going on a cash diet means taking out money from the ATM at the beginning of the month and using only that to pay for your expenses; when you run out, you’re done spending for the month. If trying a cash diet doesn’t work, consider a complete budget overhaul to help you make it through the month with more ease.
6. One Gift Purchase Throws Your Whole Month Out of Whack
Birthday parties, weddings, and housewarmings are meant to be fun events, but they’re more stress than necessary if you don’t have the cash to cover all of the expected gifting that goes along with them.
How to Fix It:Instead of getting thrown off monetarily every time you have to buy someone a birthday or wedding gift, start a savings account specifically for those purchases. As the holidays approach, now might be a good time to siphon off a little extra cash into a new savings account each month so that by the time December rolls around, you won’t need to use your whole entertainment budget on gifts for other people.
Evaluate your current budget for these six signs and implement our recommendations to keep your spending healthy and your wallet happy. If you still need some help cleaning up your budget, visit our Personal Finance Learning Center for additional tips and tricks.