Over or Under Budget? What to Do in Both Cases
If a budget is a plan for your money (and it is!), what happens when things don’t go according to plan, and you’re either over budget or under budget?
Around here we practice the zero-based budget, which means income minus expenses equal zero. In other words, we account for every single dollar before we spend a penny.
An extra trip to the grocery store or a big drop in gas prices might mean you’re no longer hitting zero with your plan. If this happens, you may find yourself stressed out or resigned to a busted budget. But we think there’s plenty of room for easy action. Today we’ll cover what you can do to get those numbers back to zero.
What to Do When You’re Over Budget
We know how it feels when you realize you’re over budget. Bummerville: population one. But we’ve all been there. And with intention, you can get right back on track.
Remember, our goal with a zero-based budget is for income minus expenses to equal zero. So, if you spend too much money on groceries this month—say $425 instead of $350—you’re now $75 in the hole. Time to make up the difference!
Look around your budget for categories that will allow you to get by with less this month. A few ideas:
- Have a date night in. Rent a movie online and enjoy dinner on the couch once your kids are in bed. You’ll save the $75 (and then some) you planned to spend on a sitter, restaurant and theater tickets.
- Challenge yourself to a spending freeze. Avoid your favorite spots where you spend fun money, like Target, Amazon, Home Depot, the bookstore, the mall, or the flea market. Instead, look for ways to have fun for free!
- Grab a little here and there. Use coupons, delay your dry cleaning, or take back recent (and unused) purchases. Get creative, and you’ll come up with $75 in no time!
What to Do When You’re Under Budget
Leftover money? Yes, please!
This is what we call a good problem. When you spend less than planned, you have more to put toward money goals. You just need to make sure you actually move the money around.You can approach being under budget two different ways.
Option 1: Work the Baby Steps.
Add up all your under-budget categories. If you’re $50 under on groceries, entertainment and car repairs, that’s $150! Once you finish your happy dance, put that money to good use!
- If you’re on Baby Step 1, 2 or 3, we recommend putting that extra money toward your current Baby Step. You’ll be amazed at how easily you’ll knock those steps out if you do this.
- If you’ve finished Baby Step 3 and have your full emergency fund in place, you may choose to put the money toward some upcoming expense, such as your vacation fund, a new jacket you’ve been eyeing, or your car insurance bill. It’s your call!
Option 2: Reward yourself.
Roll leftover money into next month’s budget.
If you’re $50 under in your restaurant budget because you caught the cooking bug, treat yourself! Add that $50 to your spending plan the following month in the category of your choosing.
The Importance of Adjusting Your Budget
After you right the ship, you’ll want to look for ways you can avoid going over or under budget in the future. You can do this by asking one simple question: Why?
As in: Why did I overspend? Why did I underspend?
You might find that factors outside of your control caused your budget to be off-balance. Maybe you’re having trouble keeping up with the growing appetites of your teenage boys. If so, consider increasing your grocery budget for the foreseeable future.
You may also discover a few occasions where overspending or underspending were in your control. Perhaps you just don’t buy clothes as often as you thought you would, but would much rather go out to eat every Friday night. It’s your money you’re spending, so feel free to make adjustments until it’s just right.
Let’s be honest, overspending sometimes takes place when we spend without thinking. Perhaps you needed a last-minute baby shower gift, grabbed a new pair of shoes just because, or simply didn’t know how much money you had left in any given category. It happens!
So in addition to adjusting your budget, you’ll also want to track your spending. EveryDollar makes it easy! You can keep on top of how much you have left to spend by manually entering your transactions. Or use a simple swipe when you upgrade to EveryDollar Plus.
Remember: Budgeting Takes Time to Learn
Folks who are new to budgeting go over budget and come in under budget a lot. That’s because it takes time to figure out exactly how much money you’ll need in each category.
We suggest you give yourself a solid three months to get things right. Three months allows you the time you need to figure out the cost of your main expenses, such as groceries, utilities and clothing.
And even after three months, be sure to keep an eye on all your expenses and adjust your budget as needed. Soon enough you’ll get better at anticipating and preparing for those one-time costs that pop up and be a budgeting pro!
And that’s when you hit the sweet spot and budgeting gets fun!