Re-evaluate your budget every month
Most Americans may understand the importance of following a budget when it comes to disciplining spending, saving money, paying off credit card debt and bills, and allocating resources toward retirement. But even though many adults establish and follow a budget, they may find themselves falling short some months and not understanding the reasons behind it. While budget shortfalls may occur for several reasons, one of the most common is that individuals do not create a new budget every month, and instead rely on the same financial information to manage their spending.
It’s easy to understand why many Americans make this budgeting mistake. Many expenses that go into a money management plan are fixed, such as housing and student loan payments. Other costs, including utilities, cellphone payments and credit cards, may only fluctuate by a few dollars each month. But the truth is, budgeting for the same amount each month gives consumers very little wiggle room when an unexpected expense arises. Fox Business gave fluctuating utility bills as an example, as often times these place financial strain on individuals who don’t expect a higher than usual balance.
In addition to bills, costs for other expenses tend to fluctuate based on the economy. With gas prices nearing $4 per gallon, many consumers are finding they are stretching their wallets thin at the pump, especially those that commute long distances for work. Inflation can also cause a spike in certain food prices, which can take a heavy toll on cash-strapped families trying to keep their grocery bills low.
Lastly, failing to factor in seasonal spending can also throw individuals off their budgets. For example, summer weddings, vacation travel, birthdays and holidays can take a significant chunk out of an individual’s income if they are unprepared for the expenses.
Adults who know they have a wedding to attend next month may want to carve out a place in their income to purchase a gift or book travel accommodations. Homeowners who are planning on running their air conditioning more than usual as the weather warms up should expect and account for a higher bill. Planning ahead for these changes can help adults become more flexible spenders and prevent them from being forced to rely on credit or savings to combat unexpected costs.