When Should You Update Your Budget?
Knowing Where Your Finances Stand Can Help You Remain Fluid and Prepared
Your budget is a blueprint for keeping cash flow in the positive, and also for sticking to your savings goals. It’s a good idea to have one overall budget. Seeing the big picture gives you a good sense of where you stand financially, and it helps you plan to stay on track. A budget should always reflect your financial goals but, remember, it is a guide. It can be adjusted when needed. When is that exactly? Here are some helpful tips to know when to modify and update your budget.
Expenses and cash flow tend to fluctuate seasonally and also at certain times in our lives. Consider the following common causes to help you prepare and adapt your budget accordingly.
We tend to spend more money during certain holidays. It can reduce stress to plan and budget for this increase in spending. One of the easiest ways to prepare is to have a “Holiday Fund” account to put money into throughout the year.
Spring Cleaning: Spring cleaning is a great opportunity to rid clutter and possibly make a few dollars. As you’re organizing your home, you might come across items that you no longer need. It might be beneficial to sell them at a yard sale, online, or even to a consignment shop. Spring is also a great time to clean up your spending habits. Begin by reviewing your monthly banking account statements to eliminate unnecessary charges, such as subscriptions you rarely use. Evaluate other expenses like interest rates on your current debts, insurance premiums, and also how often you are spending money on luxury expenses, such dining out. What may seem like minor changes can add up and really help you cut back on expenses. Once you’ve made these adjustments, you’ll want to update your budget to reflect the changes.
Heating Up in Summer: As temperatures rise, so too might your use of electricity when you crank the fans and air conditioners. You can keep your home cooler - and save money - by keeping your curtains drawn (avoiding heat buildup during the day), using energy efficient cooling systems, and using only a ceiling fan to circulate the air. You just might soon see the fluctuation in your savings too as you adjust your budget to reflect the reduction in expenses on your electric bill.
Back to School in the Fall: Clothes, backpacks, books, and more! It’s easy to feel overwhelmed by the demands of back-to-school shopping. Make sure to compare prices online and with different retailers to find the best deals. Take advantage of credit card rewards programs. Putting your expenses on a cash-back credit card could put your money to work for you. You might also consider teaming up with fellow parents to buy supplies in bulk. This is a great way to save on things like hand sanitizer, notebooks, pens, and other classroom supplies. Remember to include all back-to-school expenses in your budget so you can stay on track with other responsibilities.
Cooling Down During Winter: When the temperature falls, your heating bill may rise. The days also become shorter and therefore the use of lights can increase your electric bill. Keeping your curtains open during the day will not only let the light in but it will allow the sun to naturally warm your home. You can lower your thermostat by a few degrees and save a little money at the same time. Don’t forget to adjust your budget to prepare for these fluctuations.
College: Your continued education (or your child’s) could include more expenses than just tuition and books. Living on campus could also mean budgeting for expenses like technology and electronics, clothes and laundry, transportation, dining out, health insurance or medical costs, and emergencies. It’s recommended that both the student and the parent each have a budget to effectively prepare for the expenses of college.
Getting Married: Figuring out your wedding budget can be confusing if you’ve never planned a large event. It’s important to keep the event’s expenses realistically within your budget. Start with determining the kind of wedding you want and begin laying out what that would cost. This will help you decide where you can spend and save money.
Having a Baby: The cost of preparing for a new baby is extensive, considering he or she will need food, clothes, diapers, a place to sleep, and on-going medical check-ups and expenses. Keeping a separate fund on the side for the baby’s needs will help. You will also want to re-check your life and disability insurances. Being insured can give you peace of mind that your growing family will be taken care of if something happens to you. With a baby on the way, you have someone who will likely depend on your income for the next 18 years or more. Adapting your budget to your new baby will be essential to save and spend efficiently.
Buying a Home: In most cases, a down payment and closing costs are required when purchasing a new home. That’s just the beginning. Once you own the home, there’s a possibility you might run into maintenance needs, repairs, and emergency costs. This life event will require some adjustments to your budget so you can save before purchasing a home. Once you own your home, maintaining an emergency fund or home maintenance fund for future home preservation is the best way to be prepared for the inevitable.
Divorce: This is not an experience that many of us are prepared for but if you are facing a divorice, it’s important to understand that your overall expenses will vary based on the complexity of your case. Typically, a couple will need to consider the cost of a divorce lawyer, court fees, and possibly the financial changes that come with dividing a dual income household. In more advanced cases, there can be the cost of tax advisors, real estate appraisers, spousal support, child support, and possibly the cost-of-living expenses during a separation. Should you find yourself in this life event, gather your financial records, assess your marital and non-marital assets and liabilities, determine your legal fees, update your personal financial accounts accordingly, and readjust your budget to reflect the changing expenses.
Retirement: Most of us have probably been dreaming of this life event for many years. Having a “nest egg” is very important, but it may not be all you need to enjoy your retirement with ease. It’s crucial to prepare an entirely new budget based on your fixed income. There may or may not be much room for luxury expenses and big purchases once you no longer have a steady income. A big part of creating this budget will be deciding what your retirement will look like. Where will you live? Will you travel? Will you sell your home? Will you have any dependents? Do you have a pension plan and are you planning to collect social security income? Your credit union or bank may have a Financial Advisor on staff to help you plan for this important life event in advance. What a reward it would be, after all of those years of hard work, to sit back and truly enjoy your “Golden Years” without financial frustration.
As you can see, there are many stages in our lives where our cost of living can fluctuate. Keeping a budget can help you focus on your needs and your wants as you plan for these life changes. It’s important to have a firm grasp of where your money is going, and a budget is a great way to accomplish that.
If you’re interested in learning more, check out the Balance Pro online financial resource. You’ll find articles, calculators, and videos related to budgeting for these life events and more. If you have any questions or would like to talk to one of our friendly Member Service Representatives about a budget plan, please give us a call at 315-735-8571 or schedule an appointment today.
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