6 Signs That It’s Time For A Money Makeover

by Aileen

Why would a budget need a makeover? One reason for this is that it takes awhile to create a truly functioning budget. We have to look at our yearly expenses. Typically people make budgets for monthly expenses and forget to include the bills that pop up annually, semi annually and quarterly such as membership renewals, property taxes, insurance etc…We also tend to forget about our other non-monthly expenses like gifts, homewear/household items, and my favorite… hair salon visits.

Makeovers can range from a tiny adjustment to a complete overhaul. What is important is that we take the necessary action and make the changes. Typically I prefer the kaizen approach, small continuous change however, some situations, such as loss of a job, demand a complete overhaul.

So how do you know when it’s time to revisit your budget? Below are  6 signs

1.  Your budget doesn’t seem to be working – You’ve made a budget and it works out on paper, when you run the numbers it looks great! Yet each month you find yourself borrowing from your savings to pay the last couple of bills and you notice that you aren’t able to put it back into the savings account the following month. Now there is an ongoing leak in your savings account. Oh No! Big sign you need a makeover! One of two things is happening (1) the budget isn’t accurate, you may be missing some expenses, or (2) you need help with the discipline part of sticking to your budget, perhaps you need to play Zero Dollar Day, daily.

2. You have had a decrease in income – oh so many of us have experienced this, myself included. With companies downsizing we see layoffs, furlough days and pay cuts so we have to adjust our budget. This situation may need a complete overhaul rather than a few small improvements. Ignoring this change and keeping the previous budget can dangerously deplete the savings or increase debt.

3. You have had an increase in income – Congratulations, you’re making more money. This is a great time to review your budget and see what would be the most beneficial change. It could be taking a portion of the extra income and paying off a chunk of debt or investing it. Maybe, just bulk up your savings. Just be sure to allocate the extra cash otherwise you may end up spending it and feeling like you never had the increase.

4. You have a new additional expense – It could be a new insurance premium, a new family addition such as a baby or live-in relative, or it could be a new car that isn’t very fuel efficient eating up more dollars in gasoline. You need to make the adjustment for the new expense. Be sure to add it in and run the numbers. If we don’t add it into the budget it may surprise us with an over draft fee on the months that we have those larger bills.

5. You’ve paid something off and no longer have that monthly payment – This could be paying off a credit card, car payment, student loan etc…This means more cash flow. In your money make over, you might start a separate account for this cash flow if you are saving for something big or you might decide to get involved in new investments or just bulk up your savings. When we don’t make an adjustment for this new cash flow it seems to disappear. Find a new home for this dollar amount in your budget. Go on, give it a spot on the spreadsheet.

6. It’s been 6 months or more since you last reviewed your budget – Yes, it’s time to dust it off and see how it’s doing. In six months we may have forgotten about a couple new monthly expenses, perhaps gas or groceries went up and you didn’t realize it. Maybe you’ve got an extra minute to research different investments options and can revamp what you’ve got going on. Perhaps you want to move some dollars from a savings account to a money market account.

We cared enough to make a budget and research where to save and invest, isn’t it worth keeping that work updated? Same as a wardrobe, just because we had a complete wardrobe in 1989 doesn’t mean we don’t have to update it periodically. Fashion trends recycle and retro is in, but do you want to take the same gamble with your financial life? I’d rather a hole in my T-shirt than a hole in my budget.

Budgeting isn’t just to keep us out of debt trouble or just to keep us living within our means, it’s about creating our financial future. All too often we feel if we pay our bills on time then we don’t need a financial facelift. Truth is, the more we keep up to date with our cash flow and pay attention to it – the more we can do with it. The better we can grow it. Financial makeovers keep our budget looking it’s best and being it’s best.

* The author is not a financial advisor and no information found on this site should be construed as financial advice. This is for entertainment purposes only.
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{ 10 comments… read them below or add one }

Jean Sarauer June 3, 2010

I’m glad you included ‘an increase in income’ as a reason for a budget review. This is hardly ever factored in, so that raise, bonus, or whatever is not used constructively. I should know because I’ve been guilty of this many times :)
.-= Jean Sarauer´s last blog ..6 Things That Get Easier About Blogging if You Just Keep Going =-.

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Aileen June 3, 2010

I’ve been guilty of it too and then it’s the yucky feeling of – it’s gone & where’d it go. It’s also exciting to contemplate an increase in income. Often budget topics don’t include increase – and increase feels good (as well as signals a positive result from law of attraction) :)

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LOUISE June 3, 2010

A hole in my budget – boy you hit the nail on the head with that one. I started revamping in early May and was so surprised at the holes I found. Your advice is great. I found that “tightening the belt” is not as difficult as I thought it would be, sometimes it is thinking twice about a choice! Thanks Aileen.

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Aileen June 3, 2010

It’s good to find the holes – so much can leak out otherwise. yes, just thinking twice – being a bit mindful with it :)
Thank you for stopping by today!!

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Manal June 3, 2010

All good reasons to review and update for sure.

For me personally whenever I do a budget or financial review things turn out to be better than I thought. This good news motivates me to keep doing it.

The most important reason is to find those holes. Sometimes little tiny things add up and before you know it there is a big hole.

Thanks so much Aileen.
.-= Manal´s last blog ..The Cosmic Creative Process: Transforming Chaos to Beauty =-.

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Aileen June 4, 2010

“when ever I do a bud get or finan cial review things turn out to be bet ter than I thought” WOW Manal, I love that!!!!!!!!!!!!
Oh those tiny wholes, I’ve experienced the damage they cause – it’s amazing how expensive my coffee habit was – shocking actually.

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Katie June 3, 2010

Good reminder and interesting way of thinking about budgets. You’re right, we often don’t think of tweaking our budget as life changes. I’ll have to dust mine off and find time to give it a little face lift. Like you say, it’s all part of creating your own future. I’m all over that!
.-= Katie´s last blog ..How To Dance Through Life =-.

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Aileen June 4, 2010

Absolutely!! So much nicer to create the future now, rather than try to undue it later – tried that one before, not so great
:)

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Angela Artemis June 3, 2010

Aileen,
This is music to my financial planner ears!

I can’t tell you how many times I’ve refinanced customers who lived beyond their means and then needed to come back and take more equity out of their homes to pay down credit card debt.

Great post!! Money – matters and when it doesn’t you’ll find you don’t have any.
.-= Angela Artemis´s last blog ..Would Your Rather Have a Big House Or A Big Life? =-.

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Aileen June 4, 2010

Wise woman you are!!! “mat ters and when it doesn’t you’ll find you don’t have any” so very, very true! I must say an intuitive financial planner is a great combination!

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