Over or Under Budget? What to Do in Both Cases
So you’ve made your budget for the month. You have planned for all your expenses and punched them into your budget. It’s exciting to know you are prepared, right? In fact, once you’ve set the plan, there’s only one thing left to do—live by it.
And that’s where plans can change.
As you track your spending during the month, you’ll notice how you go over budget in one area or how you have budgeted way too much in another. So how do you handle the ebbs and flows each month?
Here’s what to do with your budget when you are over or under spending. Consider this your plan when your plan doesn’t go according to plan.
What to Do When You’re Over Budget
You may feel defeated when you look at your spending and see that you’ve gone over budget. But the good news is you can take steps to get control again.
When you go over budget in one area, you need to trim an equal amount from another area. So if you planned to spend $100 on eating out and actually spent $125, then lower your spending somewhere else by $25 to make up the difference.
Small changes to the rest of your budget can do the trick. Rent a DVD instead of going to the theater for date night, look for coupons to use on your next grocery store trip, or delay your dry cleaning run until next month.
While you are adjusting your budget, look at why you overspent. Did the cost of gasoline go up and you now need to increase your gas budget? Did you buy a gift for a friend’s baby shower that you forgot about until the last minute? While you can’t control fuel prices, you can review your calendar before you create your budget each month to see what purchases are coming and prepare for them.
What to Do When You’re Under Budget
Leftover money? Yes, please!
When you spend less than you thought you would, you have more available to tackle your next money goal.
You can handle extra money a couple of ways. The first way to approach this is to add up all the categories where you come out ahead. If you’re $50 under on groceries, entertainment and car repairs, that’s $150! After you finish your happy dance, put that money to good use! If you are 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 big upcoming expense such as your vacation fund, a new jacket you’ve been eyeing, or your car insurance bill. It’s your call!
The other option is to roll the money into next month’s budget. If you’re $50 under in your restaurant budget because you caught the cooking bug, then treat yourself by adding that $50 to your spending plan the following month in the category of your choosing.
The bottom line is, you have to tell that money what to do! Putting a lump sum toward debt, savings or a big expense can give you a huge jolt of momentum. Try it and see what we mean!
One More Thought
If you are new to budgeting, you may find yourself over or under budget in certain categories quite a bit in those first few months. That’s okay! Give yourself three months to get it just right. This will allow you time to figure out the cost of your mainstays such as groceries, utilities and clothing and adjust as needed.
Keep an eye on all your expenses throughout the month, and adjust your budget as needed. You’ll start to get better at anticipating and preparing for those one-time costs that pop up. Once you can do that, budgeting becomes fun.