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Budgeting

How to Plug the Holes in Your Budget

If you start picking up distress signals, run your budget through these checks.

One good reason to endure the occasional drudgery of budgeting is that it alerts you to trouble while you still have time to do something about it. You're forced to find out why your expenditures are climbing and to take action.

If the electric or gas bill is higher because the rates were raised, you'll have to revise your monthly forecasts for that budget item and figure out whether other items need to be cut to pay for it. If rates haven't risen, maybe it's time to discourage the kids from taking such long showers two or three times a day.

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Sometimes a budget flashes danger signals that are more difficult to interpret. If you start picking up distress signals, run your budget through these checks:

  • Are you buying too much on credit? Perhaps you got in this fix because you didn't watch what was going on. Examine budget categories where spending overshot allocations, paying particular attention to your credit card statements. The finance charges they generate could be enough to foul up your estimates.

  • Are you behind the times? You may be in trouble not because of unnecessary spending but because your necessary spending now costs more. This is a common experience, and people who budget sometimes have trouble coping with it because they estimate spending on the basis of prices in effect at the time the budget is drawn up. You should revise your budget from time to time throughout the year to keep it in touch with reality.

  • Did you create a straitjacket? Allow yourself leeway. Better to budget a bit too much in a few categories (certainly including miscellaneous or contingencies) than to end each month robbing Peter to pay Paul. The purpose of a budget is not to make impossible dreams come true but to make attainable goals come more easily.

  • Are you doing somebody else's thing? Your budget is unique to you and your family. It embodies private decisions you make about how you will allocate your resources. Behind those decisions are your own goals, aspirations, values, hopes, anxieties, lifestyle, commitments and, to an important degree, even the expectations of people whose expectations you regard as worthy of honoring.

    In short, you can't live by somebody else's budget.

Remember, too, that your budget is not etched in stone. Yes, you'll need a certain amount of self-discipline to stay within your spending limits, but you also have to be realistic.

For the next few months, keep close track of your spending -- even the pocket change spent on vending machine snacks or the morning cup of coffee. You'll likely discover that you forgot to account for something. Instead of getting angry because you blew your budget the first month, rethink your numbers and try again. The only way you can fail is by giving up.

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