Fear of facing the reality of not having enough money, a lack of time and the belief that you won’t be able to have any fun are some of the common reasons people say they don’t want to create a budget. For some, the thought of just getting started raises so many personal budgeting questions that it’s too overwhelming to review finances and outline spending habits.
However, learning how to enjoy a lifestyle you desire while still staying within your budget is a necessary part of everyone’s life. We’ve put together a list of five common budgeting questions and answers to help you get started.
How often should I update my budget?
After you have created your initial budget, it can be easy to want to take a LOOONG break from budgeting. While you likely won’t have major updates to make very often, it is a good idea to update your budget regularly. How often you update your budget is up to you, but a few recommended times to update your budget include:
- Monthly, to review how accurately your expenses matched your budgeted amount and identify any areas where your budget needs to shift (or your spending needs to be adjusted). Be sure to factor seasonal spending into your budget, such as back-to-school or holiday shopping.
- When your income changes, this includes changing jobs, losing a job, getting a raise, adding a side gig or other factors that may increase or decrease your take home income.
- After a major life change, like retirement, having a child or getting married (or divorced).
Why do I always have “surprise” expenses?
Surprise birthdays, donuts at the office and days off from work can be fun, but surprises that come with extra expenses you weren’t expecting steal the joy. Sometimes surprise expenses really are surprises, such as a trip to the vet with your pet or a nail in your car tire. Other times, expenses are actually recurring (though maybe not monthly) expenses that people tend to overlook. These can be in the form of subscriptions that are billed quarterly, birthday parties or even home repairs. It is a good idea to review three to four months of past expenses when setting up your budget to try to catch some of those less-frequently billed services. Adding a separate line in your budget for travel, as well as for gifts is also helpful. Be sure to add extra room in your entertainment budget for eating out, as well as small impulse buys like snacks or magazines.
How do I have fun while still sticking to my budget?
One of the reasons people may be apprehensive of setting up a budget is they may think that means they won’t be able to have as much fun. For many, they feel that budgeting means they won’t be able to spend any money on the things they enjoy, such as concerts, frequent restaurant outings, sporting events and more. The truth is, it may be just the opposite. Often times people will find that by NOT budgeting they are very stressed at the end of the month and struggle to pay bills or add to their credit card debt. On the other hand, budgeting means you get to decide how you will spend your money. That means you can plan for more money to be spent on the things that matter most to you, such as growing your savings and attending concerts or paying off debt and still have money for doing something fun like eating out once a week.
How much should I set aside for savings?
How much you should have in your emergency savings varies from person to person, but aim to start saving with a goal of setting aside $1,000. After you have $1,000 saved up, aim to build an emergency savings that equals three to six months of living expenses. This will help you take care of your daily living expenses should something happen. Be sure your living expenses factor in your household size, lifestyle and comfort level. To help save your emergency fund for emergencies only, you can set up a separate savings like Verve’s Name Your Savings account.
How fast can I pay off my debts?
Whether you’re new to budgeting or consider yourself to be a budgeting pro, you may be anxiously awaiting the day you’re officially debt-free. As you build your budget, be sure to be realistic about how much you can put toward your debts. While you may want to pay it off as quickly as possible to not have lingering debt hanging over your head and to reduce the amount you pay in interest, putting more to debt should only be done if you’re able to do so while also keeping up with your other expenses. Another option for paying off debt quicker without putting too much strain on your budget is to consolidate higher interest debts (such as personal loans, auto loans or credit cards) into one, lower-rate loan. You’ll benefit from one payment due date to remember, and will likely pay off your debt sooner with lower interest charges.
Want more budgeting resources? Check out our monthly blog posts for more tips.