You created a budget aligned to your goals, but at the end of the month you discover that you overspent in a category or two.
Should you throw the budget away?
If you busted your budget, that’s ok. Budgets don’t make you infallible, they help you to be thoughtful about how you’re choosing to spend money so you can create healthy financial habits. Let’s look at some ways to get back on track.
Don’t stop budgeting
Busting your budget can induce anxiety, and people commonly deal with anxiety by avoiding whatever is making them anxious—in this case, the very act of budgeting.
But if you ignore your finances, you’ll likely create more anxiety in the future. That could lead to even more money mismanagement and to debt. Debt can lead to lower self-esteem, lower productivity,1 and even depression.2
Budgeting is a habit. The more intentional you are with budgeting, the closer you’ll get to your goals.
Avoid using that credit card
If you busted your budget and you need money immediately, using your credit card can be dangerous. You’ll have less ability to pay those debts next budget cycle, and those debts can add up. The average American has about $6,000 in credit card debt.3
Consider using your emergency fund
An emergency fund is cash savings that you can tap in the event of unexpected expenses. If you need money now, it’s usually better to tap that fund than it is to go into debt with a credit card or a loan.
Identify the culprit
With your immediate needs taken care of, let’s assume you want to get your budget back on track. Let’s first identify where exactly you went wrong.
Did you overlook a spending category? Misjudge how much something costs? Forget to budget for irregular expenses like a home or car repair? Engage in a little retail therapy after a bad day?
The better you identify the cause of your lapse, the better you’ll be able to devise ways to prevent lapses in the future.
Adjust your budget
If you overran your budget by a significant amount, you may need to adjust your budget—and that’s ok. Look for ways in the near-term to help make up that overspend and examine whether you need to adjust how you allocate your budget.
Ask yourself: Is my budget realistic? If you budgeted $150 for groceries but you consistently spend $200 or more, examine what you’re buying. You may need to track your expenses to find out where you’re spending too much. Or, you may just need to budget more money for that category.
Don’t forget to budget in fun
Budgeting is not a “spending diet”. Remember to budget for what makes you happy, too. Just like working toward a healthy body, the best financial habits are the ones you can maintain in the long term and work with your lifestyle.
Budgeting is a habit
Creating a budget isn’t about setting and forgetting it.
It’s about developing the muscle to be thoughtful with how you use your money.
Busting your budget is a signal that you need to be more thoughtful—and that’s a good thing. The more intentional you are, the more confident you’ll become. You’ve got this.