Adjusting Your Budget
Be it relocation, a pay raise or an upgrade in your relationship status, life can change on a dime or windfall. These ripples and riptides can either put some wind in your sails en route to your goals, or shipwreck you entirely.
Your budget is your life vest, anchor and North Star all in one. But it’s not static. Sometimes you need to adjust your sails to adjust, retrofit or expand for the gains, drains and murky waters ahead.
To help keep your budget on track…
- Involve the entire family. Agree on a budget up front and meet regularly to check your progress
- Stay disciplined. Try to make budgeting a part of your daily routine
- Start your new budget at a time when it will be easy to follow and stick with the plan (e.g., the beginning of the year, as opposed to right before the holidays)
- Find a budgeting system that fits your needs. (e.g., electronic spreadsheet or physical ledger)
- Distinguish between expenses that are "wants" (e.g., designer shoes) and expenses that are "needs" (e.g., groceries)
- Build rewards into your budget (e.g., eat out every other week) to keep yourself motivated
- Avoid using credit cards to pay for everyday expenses. It may seem like you're spending less, but your credit card debt will continue to increase
In the event of…
- A windfall, use the money to increase your savings and pay down debt
- A raise, don’t just absorb it into your spending; apply it to your debts and savings goals (50/50 is a good way to celebrate your hard work while also increasing your financial stability)
- Drowning (in consumer debt, that is), review your input and curb your output
- Change, don't replace one bad spending habit with another; keep living within your means and keep your bad habits at bay
- Inflation, when this happens, it’s time for a COLA.
What is a COLA?
It’s an acronym for Cost of Living Adjustment.We the people have experienced a gargantuan cost of living swell, just within the span of a single generation. Imagine the havoc little fluctuations here and there can wreak upon your personal budget.
How do you go about a COLA?
For some, it’s automatic. But for our generation, a COLA is something we need to ask our employers for or budget for.
Just keep tracking
The most important thing is to continue to monitor spending and making sure to reevaluate your budget when things in your life change, like a change in career/income, a move to a new location, getting married, starting a family, etc. As life changes, so will the things you want and need to buy. Make sure you don't replace one bad spending habit with another, and keep living within your means.