Budgeting is directly related to wealth-building. It determines your spending and saving patterns. A good budget helps you to be on the right financial track and achieve your goals.
As you get accustomed to spending as per your budget every month, it’s necessary to think about certain situations when a budget review is a must. You have to revise your budget and change your spending pattern.
In this post, I’m discussing a few situations when you have to review your budget and change it completely. Here you go.
1. When you get a promotion: Extra cash is always welcome but you must use this money judiciously. Whenever you get a promotion or a salary hike, think about how you will allocate it into your budget. You can allocate the money to the debt payment category or savings. The primary goal should be to avoid lifestyle inflation.
Lifestyle inflation is extremely bad for financial health. It becomes too difficult to save money or pay back creditors or achieve financial goals one after another.
2. When you’re debt-free: Once you repay your debts, you’re able to free up a significant amount of money every month. This is the amount you used to pay to your creditors. Now, you should allocate this money to various categories in your budget like retirement savings and child’s higher education. Don’t waste the money on something trivial.
3. When you decide to get hitched: Marriage is not just about the union of 2 souls. It is also about managing finances together. Once you get hitched, you have to pay household bills together and make a fruitful plan for achieving your financial goals. While each couple has a different way of managing finances, it’s necessary to review and create a fresh budget every month for leading a beautiful financial life.
4. When you’re relocating to a new place: When you’re moving to a new city, your living expenses can either go up or can go down. If you’re moving to New York City, your expenses are likely to go up by 120%. Can you imagine the drastic change you have to go through? You have to analyze your budget, make several changes, and then build your savings fund.
When you’re calculating the expenses, make sure you include each expense. This includes new furniture, movers and packers, new appliances, and airfare.
Last but not least,
Children are big responsibilities. Plus, they are expensive too. However, if you plan in advance, then you can easily cover the cost and fulfill your financial obligations. Make a list of the expenses you have to bear and modify your budget plan so that you can save more in the next few months.
If you’re planning to have a baby soon, then start saving money for the essential things you have to buy right after the new member arrives in this world. Also, save money for the daycare.
Do you have a toddler who will join the school soon? If so, then reduce your expenses to build a savings account for your child’s education expenses.