Published in: Banks | April 17, 2020
4 Times You'll Need to Redo Your Budget
By: Maurie Backman
You can't just set your budget and forget it. In these scenarios, you'll need to make some changes.
Many people refuse to budget because they don't have the patience for it, think it's complicated, or feel it's a waste of time. But if you've been following a budget, you've been making it easier to track your spending and lower your chances of landing in serious debt.
Now when you first set up your budget, you probably accounted for all of your existing expenses, as well as the income you were earning at the time. But how long has it been since you've looked at that budget? If certain factors have changed in your life since creating it, it may no longer be accurate. Here are a few circumstances in particular when you'll need to rework your budget.
1. You've gotten married
Getting married means combining financial resources, and that can often work out in your favor. But if you and your spouse are carrying a lot of debt, those payments could monopolize a large chunk of your combined income and make it harder to save for other important goals, like buying a home. Either way, getting married is a good reason to redo your budget so that it accounts for both your and your spouse's earnings, but also, your financial obligations.
2. You've gotten divorced
Just as getting married means combining finances, getting divorced generally means the opposite: Suddenly, you're on your own in terms of bills and expenses, and your budget needs to be reworked to reflect that. You might, for example, think you'll manage to retain your current home even with the loss of your spouse's income, but once you redo your budget, you might realize that doing so would limit you too much financially in other areas -- even if you'll be receiving alimony to help cover your costs.
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3. You're having a baby
Introducing a new member of your family into the mix is a great reason to give your budget a refresh. Not only will you need to account for added costs like healthcare, food, clothing, and infant supplies, but your income might also take a hit if you're unable to work as many hours as you did before having a child. If you are going to be returning to full-time work, you'll need to factor in the cost of childcare, which, in some areas of the country, could, unfortunately, be just as expensive as your mortgage payment. Therefore, rerun some numbers to see what you're dealing with.
4. You've gotten a raise
Getting more money in your paycheck is no doubt a good thing, but if you're not careful, it can also be a dangerous thing. When you see your earnings go up, you may be inclined to start spending more freely, but if you don't have a handle on exactly how much more you can afford to spend, you'll risk going overboard and landing in debt.
Once your raise takes effect and you're able to see how much extra money that translates into paycheck-wise (keeping in mind that you'll pay taxes on that added income), you can rework your budget and find ways to make good use of that cash. For example, if you've been struggling to boost your savings and now have an extra $200 in monthly income, you might earmark $100 for savings and use the remaining $100 to pay for the gym membership and cable upgrade you've been wanting.
Your budget can't do its job if it's not accurately reflecting your costs and income. Invest a little time into redoing your budget if any of the above scenarios apply to you. It could be just the thing that keeps you in a steady place financially, and out of debt.
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