After reading the title of this post, what comes to mind? For many, they might think that you shouldn’t create a budget when you are 25 and have the same one when you are 55. While this should be obvious, you actually need to review and update your budget more frequently than most people think. Here are some reasons why.
You Have No Idea
When making your first budget, you are going to include everything you can think of. The problem is that you are going to forget some things and be completely unaware of things. For example, if you pay your insurance premiums every six months, odds are you didn’t account for that in your budget.
Another stumbling block for many first time budgeters is electricity. We tend to use more electric in the winter months to heat our homes. If you just used an amount for electricity based on the spring bill, odds are you estimated too low.
Lastly, other times you just need to readjust things around. Maybe you don’t have a category for bus or taxi rides and you realize you should because you are classifying them as miscellaneous.
But even if you have taken into account all of the above common mistakes a new budgeter makes, you still need to review your budget on a regular basis because life happens. Maybe you budgeted $25 a month for your cat but now he needs medicine for the foreseeable future. You need to adjust your budget.
Or maybe you met someone and now you are driving a lot more to get to where they live. You need to adjust the amount you budget for gasoline.
Or, maybe you realize that your miscellaneous category has ballooned from $50 per month to over $300. It’s time to figure out what is happening here and make some adjustments.
How Often Should You Review Your Budget
The point of all of this is, life is happening all of the time and you need to stay on top of your budget so that it is accurate. After all, the old saying here holds true ñ garbage in, garbage out. If your budgeted amounts aren’t right, your budget is going to be out of whack.
So how often do you need to look over your budget? I would encourage you to review it every 3 or 4 months. This will allow you to spot a trend in one or more categories. If you look at your budget too often like monthly you are going to drive yourself nuts.
Let me rephrase that ñ you want to look at your budget each month, but you don’t want to review it for adjustments every month. Adjustments should be made every 3 or 4 months.
By taking the time every few months to review your budget, you will catch new trends in your financial life. This will allow you to make the necessary changes so that you don’t wake up one morning 8 months from now wondering why you are in $1,500 of credit card debt.
It won’t take you long to perform the review, but it will potentially save you plenty of time and headaches in the future that you would otherwise encounter if you didn’t review your budget.