A budget is a critical component of a healthy financial life. A smart budget plan helps you to reach your goals and fulfill your dreams.
Of course, life is a roller-coaster ride and it can throw you in a deep pool anytime. One event is enough to transform your life and change your expenses. So it’s necessary to revise your budget periodically and keep your expenses under control. It’s also essential to look at the 6 indications discussed below that tell you to revise your budget.
1. You’re penniless at the end of the month:
If you don’t have any money in your wallet or checking account at the end of the month, then it’s an indication that you should revise your budget. Confident that there is no way to cut down your expenses? Look at your household budget carefully and track where you’re spending money more than you ought to.
2. Your debts are increasing day by day:
Are you receiving collection calls every day? Is your credit report full of collection accounts? If so, then it means that you’re not managing your credit cards or debts responsibly. Look at your budget and revise it as soon as you can. Find out the areas where you can save more money and pay off your collection accounts. Also read – 8 Effective get out of debt strategies for you
3. You have lost a job or got a new job:
Did you receive a salary hike recently? Congrats buddy! This is the right time to allocate more money towards debt payments and savings. You can also use the money to achieve your financial goals.
Lost your job suddenly? It’s high time you review and revise your household budget. You need to be very strict when it comes to spending money. Eliminate all your luxury expenses and focus on the things you can’t live without.
4. You have set up new financial goals:
Do you intend to clear your credit card debts this year? Do you wish to repay your student loans? Do you want to explore the world this year? If so, then it’s a situation where budget modification is required. It’s not easy to pay off debt. It’s not cheap to have a dream vacation in the exotic Mediterranean islands. You have to save a lot of money, which means you have to change your spending habits. You need to re-adjust your budget in such a way that will help you to shift money from the ‘expense’ category to the ‘savings’ category. See also: 9 Ways to achieve financial independence sooner
5. You have bought a new home:
Did you buy your first home last month? If so, then you have to make mortgage payments on top of taking care of other expenses. Your expenses are going to increase from now onwards. So you have to analyze your budget once again so that you can have extra cash in your hand for making mortgage payments.
6. You don’t have money for emergencies:
What will you do if your water pipe needs a major repair? What will you do if your car breaks down suddenly? Do you have the money to do the much-required repair? Or, will you depend on credit cards for these kinds of emergency expenses? If you depend on credit cards for covering your emergency expenses, then it implies that your budget is not working. You have to revise it to build an emergency fund. Ideally, you should set aside around 20% of your monthly income for savings.
After reading this post, you’re well-acquainted of the 6 situations where budget revisions are needed. Each situation indicates that you need to revise your budget. Look at your life and find out if there are any such indications, which you’re ignoring unknowingly. If you find even a single indication, then it’s time to revise your budget.