Honey, I Blew The Budget
April 28th, 2008 | by rachel |
If you have managed money for more than 37 minutes, you have dealt with some form of a “blown budget”. Maybe you blew it because you keep your budget “in your head”. Maybe you blew it because you bounced a check or made a late payment (or both) and had to pay lots of fees. Maybe, you blew it because you splurged on an outfit or a vacation or a spa that you “deserve” because you work so hard. Or maybe, just maybe, between baseball practice and ballet recitals and the 4 kids’ birthday party gifts you weren’t planning to buy this month, your refrigerator needed a $300 repair and you just didn’t keep as close a watch on where your money went as you should have. If any of these blown budgets sound familiar, these strategies will help you minimize the damage and get back on track.
As soon as you recognize that there is a problem, whether it is the 3rd day or the 30th day of the month, do whatever is necessary to stop the bleeding. Take the time to admit that you have blown it and make the decision to correct your course. If you manage money with a spouse or partner, tell them as soon as you realize it yourself. DO NOT, under any circumstances, throw up your hands and keep spending with the “I’ve already screwed up so a little more won’t hurt” attitude. Recognizing and stopping your overspending as soon as possible will bring your budget back under YOUR control. The sooner you can do that, the better.
Next, you have to assess the damage. Just how far over budget are you? In which areas/spending categories? Have you made late payments? Have you missed payments? Do you owe late and/or overdraft fees? How much and to whom? Have you added charges to your credit cards? Other than admitting you goofed in the first place, this is likely to be the hardest part of getting your budget back on the right track! To complete this step correctly, you will have to be completely honest about what you have spent (the total amount), where and how you paid for it. If you used a credit card because you didn’t have cash designated for it in the budget this month, admit it. If you have saved your receipts, this will be a little tedious but not difficult.
Once you have some information about exactly what you spent, you can begin to use those numbers to analyze your budget. Have you experienced significant changes in your income and/or expenses? If you eat or drive a car, you are definitely spending more at the gas station and the grocery store. Have any of your loan rates gotten higher? With all the recent changes in the interest rates controlled by the Fed, rates charged by mortgage lenders and credit card companies have gone up. Likewise, interest rates paid on investment accounts have gone down. Did you have a tax bill to pay on April 15th? Spend some time reviewing your income, expenses and your budget allocations to determine whether or not your budget is realistic for your circumstances. If it’s not, change it so that it is. If it is, watch yourself more closely so you stay within its boundaries.
Before the next paycheck, use the information from your analysis to adjust your budget. Make it reflect your current circumstances and spending needs as closely as possible. Do not waste time beating yourself up for mistakes that you may have made in the past. Likewise, don’t “sugarcoat” the unpleasant areas of your budget. Instead, accept your numbers AS THEY ARE at this point in time and commit to making the best spending decisions you can with the information as it is today.
When you receive your next paycheck, wipe the slate clean and start over. Since you have spent some time identifying and analyzing some of the mistakes you made with the blown budget, you are probably not likely to make those same mistakes this time. That is not to say that you won’t ever blow another budget! In fact, there is almost certainly a guarantee that you will. Since there is no way to keep from it, don’t sweat it. Just make sure that breaking your budget doesn’t turn into a habit that’s hard to break!