Published in: Banks | Oct. 20, 2019
How to Get Back on Track if You've Gone Over Budget
By: Christy Bieber
Did you bust your budget? Here's how you can recover so you minimize the long-term impact of breaking your spending limits.
Budgets are great tools to help you control your spending -- if you stick to them. Unfortunately, most people with budgets have exceeded spending limits at one time or another.
If you find yourself in this situation with a busted budget, the good news is that your excess spending doesn't have to impact your finances in the long term. There are ways to recover and get back on track.
So what should you do if you've gone over budget? Here are a few key steps you should take.
1. Assess the damage
The consequences of going over budget depend on just how much extra you've spent and how you spent it -- so it's important to get a full picture of what your blown budget means for you.
In some cases, going over budget may mean that you've gone into credit card debt and are now carrying a balance you can't pay off right away. Or if you were living paycheck to paycheck and spent too much, it could even mean you've overdrafted your checking account and are now facing penalties and fees.
You need to have a full understanding of what your extra spending means to you so you can figure out how much it will cost you to recover.
2. Adjust your budgeted dollars
Knowing the costs of your budget misstep will help you to figure out how much it's going to cost to fix it -- but in almost every case, you're going to need to adjust the rest of your budget to account for the overspending.
If you went over by a small amount on a particular category of spending, such as splurging on a $100 restaurant meal when you had just $50 left in your dining out budget, correcting the problem may be easy. If you have the wiggle room, just cut your food or entertainment budget by $50 for the rest of the current month or for the next month, and just like that, you’ve made up for your overspending.
But if you went over budget by a lot, you may need to do some serious budget reallocation to recover.
You may need to drastically reduce spending in the current month or in the next month so you can pay off the credit card debt you acquired, get your bank account back into the black, or put more in savings if you had to shortchange contributions because you overspent.
The key is to make adjustments to your budget over the next few weeks so you can make up for the blown budget right away and avoid long-term financial consequences.
3. Rethink your budget going forward
If you blow your budget one time because of a splurge, this may not necessitate a wholesale change in your budgeting process. But if you find yourself continually going over your spending limits, this may be a sign your budget is unlivable and has to change.
When you can't stick to your budget, take a close look at what you can tweak to make it more realistic given your actual spending. If you find you can't budget in a realistic amount for monthly expenses, you may need to make big changes, such as picking up a side gig for a few hours a week to earn extra income.
4. Build up an emergency fund
In many cases, going over your budget occurs as a result of a big unexpected expense that you can't avoid, such as car or home repairs or an unexpected trip to the doctor. But these types of unexpected expenses are exactly the sort of thing an emergency fund should cover.
Saving up an emergency fund can help you avoid ending up in credit card debt or left with too little in the bank at the end of the month. So if you don't already have one, start working on saving one today. Ideally, you should have three to six months of living expenses in your fund -- but you can start small by saving just a few hundred or a few thousand dollars, depending on your income.
Once you've got an emergency fund, you can use it to handle big budget-busting expenses. Just be sure that you only tap it for true emergencies and that you work on building the fund right back up again if you need to withdraw from it.
Don't let a blown budget affect your finances in the long term
While it can be frustrating to go over budget, it's not the end of the world -- as long as you change course and make corrections. The sooner you can recover from your blown budget, the less of an impact your excess spending will have on long-term finances -- and the more likely it is that you'll be able to get back on track and stay the course with your budget in the future.
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