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.

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.

Most Popular

House Approves $3,000 Child Tax Credit for 2021
Coronavirus and Your Money

House Approves $3,000 Child Tax Credit for 2021

The proposal would temporarily increase the child tax credit to $3,000 or $3,600 per child for most families and have 50% of it paid in advance by the…
February 27, 2021
Third Stimulus Checks Are One Step Closer to Reality – How Much Will You Get?
Coronavirus and Your Money

Third Stimulus Checks Are One Step Closer to Reality – How Much Will You Get?

The House passed President Biden's $1.9 trillion stimulus package. While the bill faces hurdles in the Senate, the provisions authorizing another roun…
February 27, 2021
Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021

Recommended

How to Keep Tabs on Your Credit Report
Coronavirus and Your Money

How to Keep Tabs on Your Credit Report

Free weekly access is ending, but several services let you view your credit files more than once a year.
February 24, 2021
The IRS Can Take Your Recovery Rebate Credit for Child Support or Other Debts Owed
Coronavirus and Your Money

The IRS Can Take Your Recovery Rebate Credit for Child Support or Other Debts Owed

Restrictions put in place to protect your stimulus check from garnishment don't apply to "recovery rebate" tax credits.
January 30, 2021
Refer a Friend to Your Bank or Credit Card—and Reap Rewards
Making Your Money Last

Refer a Friend to Your Bank or Credit Card—and Reap Rewards

Some major card issuers are giving referral bonuses to eligible cardholders.
January 27, 2021
Kids and Money: Boost Your Child's Future Credit Score
Raising Money-Smart Kids

Kids and Money: Boost Your Child's Future Credit Score

Naming your child as an authorized user on your credit card can be a great way to set them up with a healthy credit report.
December 26, 2020