The first third of the year is over and now is the perfect opportunity to reevaluate your financial situation and adjust how you use your money if necessary. Reviewing your budget regularly is a big part of maintaining your financial health. What should you consider when doing it? We explore below:
Are you on track?
Initially, when creating your budget, you set certain goals for yourself. During your review, start by measuring your performance against these goals. Are you still on track to meet them? Go over your budget goals, one at a time and rate each honestly. Then, tally them according to whether the goal was missed or achieved. The list of achieved goals gives you a sense of accomplishment, moreso if you have more items on it than the missed goals list. This may be the push you need to be a little more aggressive with future targets. The missed goals list will help you identify what went wrong – whether it was an isolated incident or a continuing problem – so that you can take steps to fix it.
Do you need to adjust anything?
A budget review is also the perfect opportunity to tweak your spending. For instance, you may discover that at the end of each month you have more money left over than you need. This means you can increase your savings or investments. Your list of goals you missed will come handy here, letting you see where you went wrong and allowing you to adjust to fix it.
Have your goals changed?
The only constant in life is change, and goals are certainly no exception. A budget review will help you keep your financial goals up to date with all the developments in your life. If some of the targets in your budget have changed, replace them with others that are now more important to you. This will position you to make strong financial moves.
Does your budget need fine tuning?
A budget review is a great opportunity to improve your original plan. You may have failed to consider certain expenses when initially creating your budget. Maybe you now have access to new financial management tools. Whatever the case, always be on the lookout for areas that you can fine tune. Examples are automating expenditure where possible, reviewing repeat expenses, and finding and eliminating redundancies.
Creating a budget is only one of many steps in personal financial planning. Once it has been implemented, you need to periodically review to gauge whether you are on track to meet your financial goals. It may seem daunting at first, but help and resources are available to help make the process easier.