10 Signs You Need to Review Your Budget and How to Do It

Creating and maintaining your budget is an ongoing process that can help you develop better saving habits. As your life and priorities change, a budgeting review is often necessary to be ready for anything and maintain a strong financial base as you move toward your saving goals. We’re here to lend you some tips.

How will you know it’s time to update your budget?

If you’re wondering when to review a budget that you’ve already created, we’ve got you covered. Here are 10 events that should point you toward a budget update:

1. You’re constantly worried about unexpected expenses. This is one of the biggest areas people tend to miss when thinking about how to budget correctly. After all, you aren’t expecting these. Car repairs, medical expenses and the like tend to pop up at the worst times—as best you can, set aside funds to account for them.
2. You often overspend in a single category. If you’re wondering which part of a budget is easiest to adjust, it’s here. If you budget a certain amount of money on groceries but spend twice that amount for a few months in a row, it’s time to adjust either how much you budget or how much you spend.
3. You haven’t budgeted for inflation. For long-term budgets, don’t forget that inflation generally increases by small amounts each year. This decreases the value of cash savings over time, making a smart savings and investment plan a key factor in helping your wealth grow.
4. You need to make room for new savings goals. One of the main reasons people make a budget in the first place is to start saving, either for the unexpected or toward a specific goal. Savings goals can be large expenses like home renovations—updating a kitchen or a bathroom, for example—or a big event, like a wedding or vacation. They can also be much more modest, like putting money toward a new pair of shoes or a streaming service that just renewed a must-watch series.
5. You got a raise. One of the best reasons to adjust your budget! Remember: Just because you’re making more money doesn’t mean you have to spend more. Consider setting up automatic deposits into a savings or investment account on the day you get paid each month—you’ll put those extra earnings to work before you even realize you have them.
6. You lost your job. If you lose your job, and there’s no immediate money coming in, it’s time to put together an emergency budget until money starts coming back in.
7. Your fixed expenses have increased. Fixed expenses are the easiest things to work into a budget. You know how much childcare, prescription medication and mortgage/rent payments cost each month. If those expenses go up, it’s important to review what other budget allocation can be changed to make up the difference.
8. You have a new expense. Maybe your daughter wants to join the school band, and you need to start taking her to trumpet lessons. Maybe you start taking classes at community college. Your partner wants to take a road trip and make some memories. All those expenses should be factored in, so you don’t come up short!
9. You haven’t accounted for annual expenses. It can be easy to forget about something you pay for every April—until April rolls back around. Plug annual expenses into your budget whenever they pop up, so you don’t forget about them next time.
10. You don’t know where your money is going. If you try to stick to a budget but still find yourself struggling to save, it’s time to reassess where your money is being spent.

How often should you review your budget?

We always recommend updating your budget when your financial situation changes, like when you start a new job or are forced to dip into your emergency savings, but it’s also a good idea to set up a regular review of your household budget. “New Year, New Budget” is never a bad philosophy, nor is a regular review every three or six months. Keep in mind that a review doesn’t have to mean sweeping changes—it’s just a good way to remind yourself of where you stand and to tweak things accordingly.

How to review and update your budget

Let’s run through a few of the basics for adjusting your budget:

1. Define (or redefine) your saving goals. Do you want to start a college fund for your kids? Are you looking to buy a home? Do you want to pay down credit card debt or a car loan? Think about what you’re saving toward and what kind of money you need to make it happen. It’s much easier to map out a budget if you have clearly defined goals.
2. Track income and expenses. Look at your finances over the last three months and compare your take-home pay against your spending. Now, separate your expenses between what’s fixed, like rent and loan payments, and what’s flexible, like food and clothing. The flexible expenses are where you’ll find opportunities to save.
3. Set your spending priorities. What spending areas are important to you? Look at your luxury/flexible spending, figure out which areas you are most interested in, and cut back on the others. Love food? Keep your dining budget where it is but spend less on clothing. Want to stay in shape? Maintain your gym membership and cut a streaming service.
4. Check in regularly to stay accountable. A budget only works when you stick to it. Stay accountable however you can—your spouse, parents and friends are all great resources to work with or use a budgeting app or website to keep you in check.
5. Update your budgeting strategy. Find a budgeting system that works for you, and don’t be afraid to switch it up if it isn’t! If you’re struggling, talk to your friends to see how they stay on budget, check with your bank to see if they have any apps or services, or do some research online. Everyone is different, so keep looking until something clicks with you.

If you frequently find yourself stressing about money, revisiting and redefining your budget is always a good step in the right direction. With a little discipline and a good plan in place, you’ll be on the right path toward your financial goals!