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What to do When Your Budget Fails You

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What do you do when your budget no longer works? Or, what happens if you overspend in a category or two?

When your budget fails you (or you fail your budget, depending on your perspective), you need to have a plan.

1. Review your budget

You’ll want to find out what went wrong so that you can remedy the situation. You’ll also want to create a plan so it doesn’t happen again.

It may be a simple fix, like a mathematical error. But you may also find that your budget categories just aren’t working for you. Maybe you’re overspending every month in the same category.

Take a hard look at your ideal budget and your actual spending to make sure that your budget is still working (or where you need to improve).

2. Discuss your budget with your spouse

Did you create your budget with your spouse? Or does one person in your family handle most of the finances?

I normally take care of all the finances (create the budget, set up accounts, and pay the bills) in our house, but I’ve learned that I need to discuss them with my husband.

Even if one person does more of the bill paying/finance reviewing in your household, it’s still important to be on the same page.

Some things to think about:

  1. Can you both live with your budget categories?
  2. Do you agree on the amounts?
  3. Do you share the same goals?
  4. Is there a way to compromise?

When our budget gets tight, the first areas I cut are dining out, entertainment (cable), and cash. That said, my husband loves watching sports, and sometimes he needs a cable package to watch the latest University of Michigan game (I’m a Michigan State fan, so I would just as soon leave the cable turned off for his games). He also loves to go to Tim Horton’s on days that he travels.

When I shrink the budget without talking to my husband, we both end up frustrated!

3. Think about your purpose for creating a budget

Did you create your budget to save for a long-term goal, like a vacation or a new couch? Or did you want to create a plan to pay off your debt? Maybe you just needed a way to track your spending and make sense of your overall finances.

Regardless of your reason for creating a budget, it’s there to help you.

By remembering your purpose, you can get back on track. If you overspent on dining out, but your main goal was to pay down debt, figure out why you overspent.

Was it because you were having a bad week at work and wanted to reward yourself for a making it through the week with your sanity still intact? Did you forget to account for a special occasion, like a birthday or holiday, when you made your budget?

In the future: Have regular meetings to review your budget

A budget is not made of concrete. It should be a moving, fluid way to keep track of your finances. But it’s important to discuss changes with your spouse and continue to account for them in your budget.

Depending on how often you review your budget or make changes, you may want to have weekly or monthly meetings. Even if nothing changed in your budget and you stayed within every category, spend some time talking about what you did right and what you can continue to do in the future to reach your goals.

If you overspend in a category or two, you can easily adjust your budget. For example, if you spend more on groceries, spend less on dining out that month. You can even make adjustments the next month if needed.

If you overspend by a lot or have an unexpected expense (or two, like that time that my furnace broke at the same time that the garage door broke – that was an expensive month), you’ll need to find another source of income. In that case, you have a choice. You can either use credit and pay for your expenses later (hopefully by the due date so that you’re not paying interest), or you can withdraw the funds from your savings account.

I’ve stressed the importance of having a rainy day fund (or even a household fund for unexpected home maintenance). While withdrawing from your savings is never fun, that’s why you have it. Pay for your expenses now, and then start a new savings goal to pay yourself back.

It’s not the end of the world if your budget fails you or you make a budgeting mistake. The important thing is to understand what went wrong and get back on track.

It’s ok to make changes as needed, but make sure that you’re making them as a family so that you don’t continue to blow your budget.

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