If you have ever gone on a diet, you know that you must create a plan that is sustainable for you. Otherwise, you will lose 5 lbs. in the first week and gain 10 back the next. This same concept is true for budgeting. When you are creating a budget, you must be realistic about your spending while also looking for areas you can cut back on. When you are creating your budget all your categories can be split into two main sections: fixed expenses and flexible. The fixed expenses would be the items in your budget that you cannot change from month to month. Examples of this would be your mortgage/rent, utilities, phone bill, insurance, etc. The flexible categories are areas where you will spend money from month to month, but you are able to decide how much you are spending. Examples of this would be dining out, gifts, vacation, entertainment, fun money, etc.
I like to imagine there are a bunch of levers on my budget machine. When my income is lower than my monthly expenses, I begin to look at my flexible categories to see which levers I can move to make my budget work for me. Rearranging money allows me to pay all my bills and “stay in the green” without accumulating debt. When I feel like I am constantly stealing money from my goal categories (vacation, investing, gifts, etc.) to pay for my monthly expenses, then it may mean that it is time to reassess. Can I cut back on how much I spend eating out? Can I use coupons or shop at different grocery stores to save money? I am not suggesting that I will never eat out again or stop buying groceries but having an open mind about my expenses can allow me to create more wiggle room in my budget.
If you would like to have a conversation about budgeting and how to make it work for you, we can help. We help our clients create personalized plans to get on the right track financially while considering their personal situations and goals.