Why You Should Take a Hard Look at Your Budget Annually

look at your budgetAlthough you may have a budget that’s been working quite fine up until now, there’s always room for improvement.

Circumstances change, and whether it’s with your finances or just life in general, the time may come when it’s time to take a look at your budget. It’s best to give your budget a hard look at least once year. Here are some reasons it might be time to revise your budget:

You Don’t Have an Emergency Fund

This is one glaring reason you should reconsider your budget. If you haven’t given yourself room to save for an emergency fund, it’s time to rework some expenses. When unplanned purchases or expenses come up, an emergency fund can be your lifesaver. Not only will it save you from any debt you might acquire, it’ll keep your budgeting from getting completely off track with your budget for that month and maybe even future months depending on how large the emergency expense is.

You Use All of Your Paycheck

If you keep ending the month with nothing left, it’s definitely time to rethink your budget. See if there’s something you could cut back on; this would be the time to track all of your monthly expenses again and reform your budget.

You’ve Had a Raise or Pay Cut

If you received a raise this year, you may want to increase the money you put towards savings or start paying off more of your debt. An increase in income could mean getting closer to your financial goal. However, if you were let go or forcer to take a pay cut, you may have to consider cutting out some expenses. Either way you’ll want to adjust your budget accordingly.

Your Financial Goals are Different

Maybe you’ve achieved some of your financial goals, or life has given you new and different goals. Whenever your financial aspirations change, so should your budget. If you’ve changed your goals, now may be the time to see how you can best start working towards that new goal. Alternatively, if you’ve reached a goal, you’ll want to take a look at your budget to see where the money previously allotted towards that goal can be best used going forward.

Your Expenses Have Changed

As life changes, so do your expenses. Maybe you’ve decided to purchase a house, buy a car, or go back to school; all of which would create shift in your finances. Any added expense will need a place in your budget. Therefore, you’ll need to reevaluate your monthly breakdown to see how you can shift finances around to accommodate any new payments or expenses.

As your life changes and you enter into new phases, so do your finances. What worked a year ago in relation to your budget, may not work this month. It’s important to keep track of anything that might affect your budget. Because, as you add or subtract expenses, or reevaluate your financial goals, it’s imperative that you take time to look at your budget and begin to revise.

When was the last time you took a look at your budget? What are some ways you adjust it to accommodate your needs?

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