How often do you look at your budget? I’m not just talking about looking at it with your eyes only, but really looking at it.
My wife and I recently bought a new house, and because of that, I’ve had to pay a lot closer attention to my budget than I have been as of late. Some reasons for that are:
- Getting a new house costs a lot of money. We were really paying attention to how much of our money was going out so we could make sure we had enough to close on our house.
- We fixed up our old house to make it more attractive to sell. Buying a new house comes with getting rid of the old house (most of the time). We spent quite a bit of money to fix and update our old home so it had some nice “curb appeal.”
- We needed to eat out more. Yes, I consider this an actual need. With two little girls at home, we were trying and keep them out of the old house as much as possible. We would also try and keep our old kitchen clean as much as possible which means we would cook as little as possible. We’ve also paid for food for friends and family that have been a huge help for us.
So obviously, even though we bootstrapped the whole process and were as frugal as possible, we were spending more money than we usually do.
What I found
As I seem to continuously find out and forget about, budgets are not a “set it and forget it” process.
After really looking at our budget, I found quite a few holes. We’ve been over our budget—and a little careless—with eating out even before it became a need with keeping the house clean.
Some of it was last minute eating out like, “Eh, I don’t feel like eating at home tonight. Let’s go out!” and other stuff was like “Wow I didn’t plan my food very well today. I’m going to have to eat out for lunch.”
I also noticed that we were spending money before we were making it a lot. Instead of having all of our money planned for, it seemed that I was having our money planned for and then some.
This is something that’s easy to do when you put all of your expenses on a reward credit card. I would always make sure we had enough to pay the credit card off, but sometimes that money wouldn’t come in until the next payday.
We were essentially “behind” a lot.
We also had a lot of hidden costs when we bought our home. We’ve spent a lot more than I would have liked and a lot more than I had budgeted.
So finding all of these things and getting a little lax with our budget got me thinking. How often should a person look at their budget?
Start with Once a Month
There are definitely situations where less is needed and probably even more situations where looking more often is needed.
But once a month is a great starting point.
Looking over my budget the past couple of months, I noticed that I hadn’t actually taken an in-depth look at it in many months—potentially more than a year.
I don’t know if there are mistakes in my budget, if the amounts are updated, or if it’s actually reflecting what I value still.
So I will be going over my budget once a month at the end of the month.
I think that’s a great starting point for both you and I and I recommend you do the same.
Here are four reasons why I recommend starting at the once a month mark.
1. Fewer Surprises
I remember this happening to me last year around the same time. My surprise last year was a nice surprise.
Last year by actually looking at my budget I noticed that we were continuously spending less on gas for our cars than we were budgeting. That was money I was able to put toward something else!
This year was a different story.
I had been spending way too much on going out to eat, home updates, and (oddly enough) parking at the train station. Even necessities like clothing and groceries I was not being intentional and planning for it.
Those expenses were starting to get out of control.
How does your budget look? What if you are actually down $50 or $100 a month and don’t know why? Looking at your budget more often will help.
What if you’re able to pay your debt down faster because of really looking at your budget more often?
Fewer surprises means less stress as well.
Without the surprises, you don’t have to worry about anything creeping up on you.
Stress can be quite the motivational killer, and I want to keep you motivated with your finances!
2. Better Planning
Looking at your budget monthly will also allow you to plan accordingly and adjust your plans as necessary.
What if, like my situation last year, you have an extra $50 a month that you can start putting toward your debt?
An extra $600 a year toward any type of debt principal will save you a lot of money in interest.
This also allows you to audit your budgeted categories such as gas, groceries, and eating out.
Again, I noticed last year that I was spending significantly less on fuel than I had budgeted.
This year, I noticed that we were not planning enough for train station parking so I had to make some adjustments.
If you end up having leftover money, and your debt payoff and saving is going well, there’s no reason why extra funds you find can’t be added to entertainment or eating out or giving.
Take a look and see what you find!
3. Fewer Mistakes
If you haven’t looked at your budget in quite a few months, there is also a chance that you could be making a large financial decision without actually knowing much about your current financial situation.
For example, you may be looking at buying a new house and think you can easily afford a higher payment.
However, it could be that there is a medical bill you are paying monthly that severely depletes the extra income that you were thinking you had toward a new house payment.
Or it could be that you need to buy a new car. By looking at your budget—and with a little research—you’ll be able to accurately determine how much more you need to set aside for gas, insurance, and car maintenance as well.
That way you’re not surprised when you have to take your car into the shop.
Now we all know that mistakes are bound to happen regardless, but the more you know about what’s going on in your budget, the more power you have. We’ve all heard the saying that “Knowledge is Power.”
Before I looked at my budget this past month, I didn’t really know what was going on with it. It was easy to make mistakes because the numbers were off.
As I said, I made the mistake of not really realizing how much I was spending on eating out. I underestimated those costs because I wasn’t keeping an eye on my budget.
And if I were looking at my budget, I would have been able to divert money from other areas of spending instead of just having to eat the cost by dipping into our savings and debt goals.
4. Less Time
Now you may be wondering how it’s going to take less time to look at your budget if I’m suggesting looking at it more. Let’s dig in.
First, the more you do something the better you get at it.
After a few months, it’s not going to take you as long to add up the numbers, catch mistakes, and make decisions on if anything needs to change.
This translates to taking less time for each trip down “Budget Lane.”
Second, even though you are looking at your budget more often, it’ll take you less time than if you were to look at your budget only every once in a while.
Some months you may make small changes that will take you 5 minutes. Another month, you may make some major changes with it taking about a half hour.
You are doing it more often so you stay in that “budgeting mindset” more. This leads to it being easier and spending less time overall.
Wondering how long it took me without looking at it for 3 to 4 months? About two hours total.
That’s right. I wasn’t even making very big changes, yet it took me the same amount of time as doing major changes for 3 months straight. Definitely would have gotten some time back on that one.
Looking at your budget monthly can give you all of the above benefits. I encourage you to do that and see what happens. If nothing else, you will get some great peace of mind that all of your affairs are in order.
When Should You Look at it More?
There are a few situations where looking at it more can be very helpful—and sometimes even necessary.
If you don’t have much monthly personal profit—the surplus amount of money you have left over after your bills are paid—it would be worth it to look at it more so you can double check there are no mistakes or that you’re still making ends meet.
For this, I recommend looking at your budget every paycheck.
Every time you get paid you can ask yourself if this paycheck’s money is being utilized properly.
When Should You Look at it Less?
Let’s be honest. Sometimes less is more.
Sometimes I wish budgeting was set it and forget it. I’m a big fan of simplification and automation.
The less I have to do with something the more I get to work on my business, spend time with my family, and do things that actually matter to me (like help people with their finances!)
In order to look at your budget less, automation is key.
Automate every part of your finances so you don’t have to touch it. You can automate:
- Your saving through automatic transfers or separate direct deposit from your employer
- Your deposits through direct deposit
- Your investing by depositing money into your 401K right through your paycheck
- Your bill pay through your bank or directly from utility or lender websites
- Your debt reduction through your credit card companies
If you’re going to automate everything, I recommend starting out reviewing your budget quarterly so you can make sure everything is going smoothly. If that isn’t working out after three to six months, change it up and try reviewing more often.
You’ll still want to double check that your money is going toward the correct things for you and that you don’t need to switch around any payments.
You’ll also want to check that your bill amounts are still lower than what you are budgeting for so you’re not over your budget every month.
Everyone’s situation is different but a monthly review of your budget is a great place to start.
If you think you need to look at it more often, by all means, do so. Less often may also work for you.
Experiment and give it a try but I encourage you to review your budget monthly so there are fewer surprises, better opportunities, and fewer mistakes. It shouldn’t take you long at all.
Let me know in the comments below how often you look at your budget and if you plan on making any changes!