Editor’s Note: This story originally appeared on The Penny Hoarder.
Whether you use an app, an Excel spreadsheet, or a pen and notebook, your budget isn’t something you blindly copy month after month.
You should take some time at the end of each month or the start of the next to think about your finances and determine if you need to make any adjustments for the coming month.
Your expenses aren’t necessarily the same month after month, so neither should your budget.
8 budgeting questions to think about every month
Ask yourself these questions when closing your budget each month to create the best spending plan for the month ahead.
1. How does my actual spending compare to my planned spending?
This is the most obvious question you’ll want to ask yourself as you reflect on your spending the past few weeks.
Do your actual expenses match the amount you intended to spend in each budget category? Where did you spend too much? Where did you spend less than planned?
2. How do I want to allocate any excess money from the last month?
If you ended up spending less than you planned for the month, what’s your plan for that extra cash?
You have a few options. You can transfer this money to the budget for the coming month so that you have more available. You can invest the money in your savings, whether it’s to build your emergency fund, boost your permanent sinking funds, or supplement your short-term or long-term savings goals.
You can invest the money in an IRA or a taxable brokerage account. You could give back by donating to a non-profit organization. Or you might want to use the money to treat yourself to something nice.
It’s totally up to you.
3. What was the reason for any overrun?
If you’ve spent more money than you planned, don’t be hard on yourself, but take a moment to analyze what caused the overspending.
Have you turned to retail therapy to counter a stressful week? Has an emergency occurred that you could not have foreseen?
Have you ordered take out too often? Forgot to factor a major expense into your budget? Is your budget so restrictive at the start that your spending limits are just unrealistic?
Think about why you spent more than you planned and what you might do differently next month.
4. Do I need to adjust spending limits for the coming month?
As mentioned earlier, you don’t want to copy and paste your budget from month to month if your spending tends to fluctuate.
Some budget categories can stay consistent, like how much you pay for rent or your monthly cell phone bill.
However, you can expect a higher electric bill during the cold months when the heat is high or the hot months when you blow up the air conditioning. If you’re part of a blended family and your stepchildren live with you every other weekend, you’ll need to save more for groceries when you have a full house.
You will need to adjust your budget if you have an upcoming event, special occasion, or trip that will take place in the coming month. And if you’ve just paid off a credit card or a loan, you’ll want to reallocate the money you put into that debt.
You should also adjust your spending limits if you consistently go over or over budget in a particular budget category – for example, if your default monthly gas budget is $ 50 but you still spend around $ 75 to refuel each. month. . If you’ve worked hard to keep costs down in this category, chances are your spending limit isn’t realistic given your circumstances.
5. What do you think of the purchases I made?
In addition to thinking about the dollars and cents of your spending, it’s also important to be mindful of your feelings about your spending, especially when it comes to discretionary spending.
Are you happy with the things you bought? Were they helpful? Did your purchases bring you happiness? Or do you feel like you’ve wasted your money or are in a rush to make a purchase? Do you have any regrets?
Keeping an eye on the emotions you feel after spending money can help you identify trends that you may need to correct. For example, if you often regret the impulse purchases you make, you can keep a list of what you want to buy, but give yourself a week or more to think about it instead of buying it on the spot.
6. How can I track my goals?
When you close a month’s budget and create the next month’s budget, it’s a good time to check on your progress towards your financial goals.
Are you on the right track to reaching your savings goals? How are you progressing with your debt repayment plan? Has your credit score increased?
The ultimate goal of your budget is to make a plan for your money so that you can achieve your financial priorities. It’s good to pay your bills on time and have enough to cover your daily needs, but don’t forget about your overall goals, either.
7. Where can I reduce my expenses?
As you create your monthly budget, take a look at last month’s expenses to see where you can cut back.
You’ll have more leeway if you can eliminate unnecessary expenses, like subscriptions you don’t use. Think about what services you are paying to have done that you could do yourself, such as doing your hair at home rather than going to a salon.
Don’t just focus on your discretionary spending. Browse your essential purchases and identify a way to cut costs. Here’s one: call your insurance company to inquire about available discounts or if they would match a competitor’s quote. Or try to reduce your utility bills by being more aware of your water and electricity use.
8. How can I increase my income?
No matter how proficient you are in money management, you can’t budget your way to wealth if you don’t earn enough income.
There are several ways you can increase your income. At work, you might ask to work more hours, work overtime, or negotiate a raise. You can supplement your regular job with a sideline or a passive income stream. You can also increase your cash flow by selling items in your home.
Finding a better paying job is another way to increase your income. Just be careful not to give in to lifestyle inflation. Focus on your personal financial goals rather than improving your lifestyle to keep up with the Joneses.
Disclosure: The information you read here is always objective. However, we sometimes receive compensation for clicking on links in our stories.