Starting a new job, getting married and many other life events will change your financial situation. If you aren’t keeping an eye on your budget through these moments, you could be missing opportunities to improve your finances with additional savings or investment. Worse, you might be risking your financial health by tacking on additional debt and forgoing saving and investment altogether. It’s easy lose track of budgeting when so much is happening in our lives. Resist that temptation and let those times be reminders to watch for signs that your budget strategy may need a change.
[See: 8 Big Budgeting Blunders — and How to Fix Them.]
1. Credit card balances start creeping up. When used responsibly, credit cards are a convenient way to make large and small purchases. Even better, a rewards credit card can shave a few cents off every purchase — or add up to free travel and other goods and services. However, if you notice that you’re using the card to delay payment, especially over several months, it’s time to reevaluate your budget. Those delayed payments mean interest charges, which will put a crimp in an already tight budget. The strategy here is twofold. First, look at your budget and see where you can make changes to accommodate the spending you’re putting on your card. Next, look at your spending habits. Can you wait until you have the cash saved to make these purchases? If the answer is yes, decide to delay purchase rather than delay payment.
[See: 12 Habits of Phenomenally Frugal Families.]
2. Your monthly expenses have changed significantly. If you’ve just made the jump from renting to owning a home or purchased a new car, other parts of your budget are going to have to shift, too. Make sure to review your budget closely and list all the new expenses for your new lifestyle. For example, on top of the monthly mortgage on your new home, your budget should include room for monthly maintenance costs, taxes and insurance. If you bought a new car, you’ll need to factor in insurance costs (likely higher than those costs for your old car) and other fees, such as increased annual DMV fees, that come with that new car smell. The point is that hidden, ongoing costs from major purchases often sneak into our check registers and credit card statements without making it into our budgets. Whenever you make a major purchase, make sure your budget accounts for it — all of it.
3. You reached your financial goals months ago. It’s not just bad news and big spending that demand a budget rethink. Whether you managed to enjoy that dream vacation you saved up for during the past few years or maxed out your annual individual retirement account contribution a few months early, you — and your budget — need to make some adjustments. Revisit your goals. Is it time to start saving for another dream vacation? Maybe it’s time to set up an investment account outside of your IRA. Or maybe now is the time to make the renovations and upgrades to your home that you have been putting off. A budget is a great tool to help us reach financial goals — just make sure you have sound financial goals to pursue.
[See: 10 Foolproof Ways to Reach Your Money Goals.]
4. You still haven’t reached your financial goals. On the other hand, if you haven’t yet topped off your IRA, or if your emergency fund is still a little short, your budget may be at fault. A close look at your budget, and your spending, can tell you where your money is going and why you aren’t reaching your goals. Are you spending more than you planned on housing, entertainment or food? If so, is it because you’re splurging, or are the cost increases out of your control? Also, analyze your budget carefully and make sure you’re reporting your income and expenses accurately. Once you know where the money is going — and that your numbers are correct — you can begin to set your finances back on course.
5. You’re always anxious about money. Nobody is immune to worrying about money, but if you sense that you’re feeling extra worried about your finances, you might have lost confidence in your budget — if you have one at all. Combat that worry with cold, hard financial facts. Clearly assess your financial situation. Sum up your assets and liabilities, add up your income and total your expenses. When you have the numbers, give yourself a goal. Maybe it’s to eliminate debt. Maybe it’s to increase retirement savings. Now that you have some facts in hand and a goal in sight, build a budget that works for you — and gives you some peace of mind.
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5 Signs That It’s Time to Change Your Budgeting Strategy originally appeared on usnews.com
