Today is part three of the ”Build a Budget That Works” series. Check out parts One and Two!
Once you’ve calculated your budget based on your three expenses it’s likely now time to make some changes. Because ever situation is very personal, I can only make suggestions rather than tell you exactly what to do about a specific situation.
The three-month average is simply a starting point to being able to build a budget, even if you find yourself in the black at the end of your calculations, there’s still work to be done.
Build a Budget: I’m in the Black!
If you find yourself in the black it’s now time to tweak your budget perfectly. Ask yourself these questions:
Is everything included?
If yes, great! If no, add and recalculate,
How much extra do you have?
If you’re within a few dollars that’s great (though may not be enough).
Does being in the black include minimum only debt payments for your budget?
If so, we now need to reallocate funds from the black to your debt. This will obviously vary depending on the individual situation but as much as you possibly can. If you have calculated everything properly to this point, all of this additional money should be reallocated to debt. If it’s a lot of extra money reallocate a majority of the funds to debt and possible give yourself some extra money on one of the other categories. If you only have a small amount in the back it’s now time to add all extra funds to the debt and think about ways to make more money for debt.
Have you considered savings? retirement? fun? kids? work less?
Depending on your financial situation, if you find yourself in the black after budgeting maybe it’s time to reevaluate your entire life. Could you bump up savings for vacation, retirement, kids, or even possible start working less?
Being in the black will vary greatly and what to do with said funds will depend on the situation.
Build a Budget: I’m in the Red
If, after you manage to build a budget based on your numbers, and you find yourself in the red, don’t fret. It’s just time to trim a little fat.
Look for cost savings everywhere!
If you’re budget is coming up short every month look for areas you can trim from. Again, this will vary depending on the situation but maybe it’s as easy as spending less on eating out or cutting out cable. If you’re really in the red you’ll need to find ways to save in big ways. Cut out all unnecessary things, trim the variable categories you have control over such as food and entertainment.
Make more money.
If you can’t make your budget work by simple trimming of categories the only other logical thing is to make more money! There are thousands of ways to do this but if you want a budget that balances whether you’re in debt or not, and your current income doesn’t cut it, you need more cash flow
Be realistic.
If you’re looking through your variable spending and find you’re spending $500/month on gas for two cars maybe you could do with one? Ideal, probably not, necessary? maybe.
Build a Budget: Stay on Top of It
Once you manage to build a budget that works, that’s not the end of it! You now need to follow through with your new budget and make sure you stick to it. As changes come up in life, and they will, you will need to adjust your budget. New bills or new babies all need to be accounted for. Changes in income, and lifestyle all need to be accounted for. Having a budget in place ensures you have complete control over your money.
Do you budget? Why or why not? What’s you best budgeting tip?
[Featured image courtesy of Steve Pell]
