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It happens to the best of us – after budgeting, spending gets messed up in one way or another.
“It’s so easy to do,” said Certified Financial Planner Diahann Lassus, Managing Director of Peapack Private Wealth Management, based in New Providence, New Jersey.
The coronavirus pandemic, economic recession and the recovery that followed likely played a role in the increase in spending. Americans are still getting used to a normal new pandemic that comes with changing restrictions, higher prices in the form of inflation, and a return to certain activities, such as travel, dining and entertainment.
Here’s how to get back on track.
Give yourself a break
First of all, financial experts say to be kind to yourself if you have a month off and use that as a data point to budget better in the future.
“None of us are perfect; whether you are a financial advisor or a decorator, we all have the same challenges, ”said Lassus. “Even though we know exactly what we need to do, that doesn’t mean we’re always going to do it.”
If you’re new to budgeting, you probably won’t get it right the first time, said Tania Brown, CFP and coach at SaverLife, a nonprofit that aims to help low-income Americans save. This is because even the most detail-oriented people tend to overlook certain aspects of their life and spending when they start creating a budget.
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Assess the damage
A good rule of thumb when budgeting is to review your spending at the end of each month, to see if you’ve managed to stay on track.
“Take the time to say what worked this month, what didn’t work and what you’re going to do in the future,” Brown said.
If you’ve overspent, see what happened. Was overspending in a category you forgot to include in your budget? Has an emergency arisen that you were not prepared for?
Identifying the problem, or where you were on your budget, will help you make a better plan for the future.
Review your goals, then your budget
Once you have identified where you went wrong, you will need to revise your budget.
In some cases, that will mean switching expense categories and potentially changing some of your goals, or meeting schedule, according to Brown.
This may mean saving less for retirement to build emergency savings, or deciding to limit activities such as dining out so you can set aside more for a down payment on a house. If your expenses mean that you have incurred debt, you will need to pay them back in your future budget.
You may also find that in the fall and winter you have to spend more money on expenses such as gifts and travel.
“The budget will always change,” Brown said. “The longer you do this, the more naturally you will adapt.”
Try, try again
An important part of successful budgeting is consistently sticking to your spending plan. This means that each month you revise and try again.
Of course, some people will have trouble with their budget for more than a month in a row. This may indicate that something else is going on, according to Brown.
You may have the wrong program or budgeting tool for you. If you haven’t found a process that allows you to track your spending and savings, it will be more difficult to stick to your plan, Brown said.
“It’s finding the right budget for you and it’s like finding a prince – you might kiss a lot of frogs along the way,” she said, adding that if that’s the problem you shouldn’t. be afraid to try something new.
However, others may face deeper issues than having the right budget. If you are constantly going over budget due to emotional expenses and it’s hampering your long-term goals or putting you in debt, you may want to consider working with a financial coach or therapist.
A financial coach can help you with the basics of money management, said Frederick Standfield, CFP and founder of Lifewater Wealth Management in Atlanta. And, if you’re having emotional issues with money, a financial therapist can help you overcome those issues to get you back on track.
Most importantly, financial experts say don’t let a month miss your budget mark put you off from the overall process.
“Acknowledge that you are human and that you are a work in progress,” Lassus said. “You will keep trying and you will understand.”
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