You’ve done the work and created a household budget to estimate your monthly expenses and calculate the income that flows into your home each month.
There’s one problem: You’re constantly running out of money each month, or you’re always overspending on items, from groceries to entertainment to travel.
These are signs that you need to adjust your budget, because the one you’ve created isn’t accurately reflecting your spending or income.
Don’t despair. Recognizing that your budget needs tweaking is the first step toward creating a household budget that truly works for you, leading you to financial stability.
Here are five key signs that you need to adjust your budget, which can reduce your financial stress.
Too Much Credit Card Debt
One of the top signs that your budget needs a tweak? For Sacha Ferrandi, co-founder of Source Capital Funding in San Diego, California, that’s when you can only make the minimum required payment on your credit card each month.
If you’re carrying a balance on your credit card from month to month, that’s a sure sign that your budget isn’t realistic enough to account for your spending habits.
“If you’re leaning on your credit card for spending, it’s time to reassess your household budget to avoid increasing interest rates and, ultimately, more debt,” Ferrandi said.
What if you can’t even cover your credit card’s minimum monthly payment? Then your budget truly is broken, Ferrandi said.
Ferrandi recommends that if you can’t make your credit card payments each month, you immediately start building your savings and including these dollars into your monthly budget.
“Setting aside even a small amount of money is the first step toward a healthy household budget,” Ferrandi added. “This will mitigate the stress of monthly credit card payments, while also providing flexibility on necessary spending.”
David Jozefiak, president and certified financial planner with Sterling Heights, Michigan-based Next Degree Financial, agreed that carrying any credit card debt from one month to the next is a sign that your household budget needs to be revamped.
“One of the first warning signs that you need to adjust your budget is not paying off your credit card balance each month,” Jozefiak said. “People usually pay all their bills first and the last one to get paid is the credit card. If you find yourself not having enough to pay your balance off, then you may be spending more than you are making and you may need to make some adjustments to your budget.”
Treating Savings as an Afterthought
Your budget should include money set aside each month to deposit into a savings account. If it doesn’t? Then your budget needs help.
Sean Fox, co-president of Phoenix, Arizona-based Freedom Debt Relief, said that savings should never be relegated to what you’ll stash away if you have any money left over at the end of the month.
“Savings needs to be a mandatory ‘bill’ in the budget’s expense section,” Fox said.
This holds true even if you can only afford to put a small amount of money away each month. Even if you can only deposit $100 into your savings account each month, include those dollars in your budget and make sure that when the month comes to an end, you are saving it.
It’s Too Rigid
Mitchell Hockenbury, a financial planner with 1440 Financial Partners in Kansas City, Missouri, says that a lack of flexibility is another sign that your budget needs work.
As Hockenbury said, “life happens.” Your budget, then, can’t be so tight that a single unexpected expense blows it. You’ll need some leeway in a strong household budget.
But flexibility also means that you should be able to pursue a new hobby, take a short trip or head out for a fancy anniversary dinner without your budget for the month collapsing.
“When you decide to take a class, start a side hustle or take a weekend getaway, you should be able to shift money from one spending category to another,” Hockenbury said. “Fixed expenses like the mortgage or auto payment are not flexible. But you should be able to take from a savings, dining out, clothing or entertainment category to slide the money into your new category.”
If your budget is so tight that you can’t adjust to your new life choices, your household budget isn’t working, Hockenbury said.
Paying Bills – Even One – Late
Have you fallen behind on your monthly auto payment? Did you not have enough money last month to pay your utilities bill?
That’s a sure sign that you need to adjust your balance, perhaps by cutting down on optional expenses such as going to the movies, eating out or buying new clothes. You need to focus on paying your monthly bills first.
“More people spend more money paying interest and late fees than on many other expenses,” Fox said. “A definite sign is you are behind on any monthly payments.”
Do you lie awake at night wondering if you’ll have enough money in your bank account to pay your mortgage? Do you worry that a utility bill will come in too, making you unable to make your car payment?
That’s lot of financial stress to carry. And that kind of stress is a sure sign that you need to adjust your budget and, as a result, your spending.
Brad Ruttenberg, co-creator of The Money Twins, a money education site, said that too many people live paycheck to paycheck and are struggling with debt. These are sure signs of a budget that’s out of whack.
If you’re worrying about money every month, take a more realistic look at your true spending habits and your real monthly income. Ruttenberg said that you should set some goals, too. This can be anything from building an emergency savings fund of $1,000 to saving up enough cash to take that long-awaited trip to Paris.
“Maintaining a budget is tough,” Ruttenberg said. “It’s so much worse when there’s no motivation. Goals motivate. You need to know your needs, your wants and most importantly, your goals.”
Ruttenberg recommends that you work with your spouse or partner to evaluate where you want to be financially in the next five to 10 years. If you don’t, you’ll likely create a budget that’s too unrealistic to work.
When did you realize you needed to make a change and implement a budget? Let us know in the comments below!
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