How Often Should You Reevaluate Your Budget?

Quick Answer

It’s wise to reevaluate your budget if you have new financial goals, your income or expenses have changed, or you’ve been hit with surprise costs. It’s also good practice to check in on your budget regularly to ensure that your spending and income are aligned.

Two young homeowners checking their budget online from their kitchen.

A strong budget is a key part of financial wellness, but it's important to make sure your budget grows with you. If new expenses pop up or your income changes, you'll want to tweak your spending plan to make sure it still reflects your financial goals.

Reevaluating your budget regularly, or as major life events occur, can help prevent overspending and under-saving. It also keeps your finances aligned with your wants and needs. Below are some simple tips for updating your budget.

Why Is It Important to Reevaluate Your Budget?

Your budget should be built around your current income, expenses and financial goals, which will likely evolve over time. If any of these components change, it's wise to reevaluate your budget. Otherwise, you may find it harder to reach your financial goals. Serious budgeting issues could also cause you to overdraw your bank account.

Here are some circumstances that might prompt you to adjust your budget:

You Have New Financial Goals

Maybe you've decided to save for a down payment on a home, start a business or grow your family. No matter your goals, you'll want a budget that can get you over the finish line. Revisit your spending plan whenever your short- or long-term financial goals change. That can allow you to set and reach ever-evolving savings targets.

Your Income or Expenses Have Changed

Whether you've taken a pay cut or gotten a raise, the first order of business when your finances change should be updating your budget. An effective budget makes room for essential bills, discretionary spending and financial goals. If your take-home pay is stretched thin, you may need to make necessary adjustments. If you now have a surplus, it's time to make a plan for how you'll use that extra money. That can help you optimize your savings and reach your goals faster.

Also add new expenses to your budget as they come up. Perhaps you've signed up for a gym membership or financed a new car. Whatever the expense, make sure you've accounted for it in your spending plan.

You've Been Hit With Surprise Expenses

It isn't possible to budget for every single expense. Financial surprises happen, whether it's an unexpected car repair or a medical bill you didn't see coming. These unforeseen expenses can disrupt your budget, especially if they result in new monthly payments. However, a healthy emergency fund can help you navigate financial surprises without wrecking your budget. A popular rule of thumb for how much to keep in your emergency fund is to save up three to six months' worth of expenses.

How Often Are Budget Reviews Necessary?

The circumstances above usually warrant a comprehensive budget review, but it's also good practice to check in on your budget on a regular basis. Every week, month or quarter, you can:

If you're managing your finances with a partner, updating your budget with help from your significant other can help reduce financial stress. That can be as simple as reviewing your budget together every week over a cup of coffee. What matters most is getting on the same financial page.

Strategies for Effective Budget Reevaluation

After conducting a detailed budget review, you may decide to make some changes to reduce your expenses. That might look like:

You can redirect your savings toward your financial goals. It's also possible to work toward multiple goals at once. For example, if you free up $300 a month, you could divide it equally between two different financial objectives—like saving for a house and paying down debt. The idea is to reallocate funds so that you're covering your essential bills while leaving room for fun and saving. Budgeting tools can make the process easier. That may involve:

The Bottom Line

You'll want to reevaluate your budget if your income or expenses change, or you encounter a major life event or financial surprise. In the meantime, it's a good habit to check in on your budget on a regular basis. It can help you stay on top of your money and monitor your financial goals.

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