HELPFUL TIPS TO RECOVER THE BUDGET WHEN THINGS GET OUT OF HAND
Maybe you just reached the other side of an emergency, visit from Uncle Murphy, or just got a little (or a lot) carried away with the holiday spirit. It’s not great, but it can happen to the best of us. Here are a few helpful tips to help you recover the budget after an out of control month or holiday financial hangover.
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RECOVER THE BUDGET BY STARTING WITH AN HONEST ASSESSMENT
First, you have to figure out where you went wrong if you want to get it right going forward. And be honest with yourself; did things get out of hand because of outside forces or was it all your own doing?
If things got out of control due to a visit from Uncle Murphy (remember Murphy’s Law, if things can go bad – they will) you weren’t prepared for then it’s time to beef up the emergency fund. If you just didn’t have one, then it’s time to start. You just saw first hand what can happen when you aren’t prepared for an emergency.
If there was no emergency perhaps you just got way out of hand with spending. It happens sometimes. I’ve been there, done that, and I don’t want to keep the T-shirt. You can read more about what to do When the Budget Doesn’t Work and get a little confession from me. Hint – sometimes it’s you and not your budget that isn’t working. It can happen to the best of us when we aren’t intentional with our finances.
If you spent way more on Christmas than anticipated, now would be a great time to start a sinking fund for next Christmas. Don’t make the same mistake next year; it falls on the same day every year so why not be prepared? It’s much better than the alternative.
Look over your holiday spending and determine if you went overboard. This should be very obvious within a week or two; kids lose interest in “stuff” fast. When half the gifts are collecting dust in a corner it’s probably safe to say you could cut back a little next year.
Once you come up with a practical budget, divide that number by the number of months or pay periods between now and when you’ll start your Christmas shopping. This is the amount of money you need to set aside every month in order to meet your goal.
TYPES OF ACCOUNTS TO KEEP NEXT CHRISTMAS UNDER CONTROL
Open a Christmas savings account and deduct a portion of every paycheck as we do, or simply set up an auto-transfer from checking to a separate saving or checking account.
The latter may be the best option if you shop throughout the year; there are penalties involved when a certain number of early withdrawals are made from Christmas accounts.
How you set money aside and what type of account you keep it in isn’t really as important as the fact that you do set money aside! Learn from your mistakes, don’t repeat them.
SET A MORE CONSERVATIVE BUDGET TO HELP RECOVER YOUR FINANCES
If you incur any debt during the out of control month, you will need to make pay off a priority in order to recover your budget. If you dipped into savings, priority one is replenishing the emergency fund before Uncle Murphy knocks on your door.
Have a budget meeting and buckle down! Do not allow this holiday financial hangover to linger! Set budget expectations that can actually be met going forward; it’s great to cut things from the budget, but you also have to cut them in real life.
Do not resume spending as usual or making unnecessary purchases until this additional debt is paid off or your savings balance is restored. This just makes good financial sense. Don’t make it worse by continuing bad habits and digging yourself a deeper hole. Savings are off-limits for unnecessary spending and so is the credit card!
ONCE YOU SET THE BUDGET STICK TO IT!
Make a realistic budget you can stick to. It may be more beneficial long-term if you start by minimizing one area of the budget at a time. If eating out is your big Achilles heel and you aren’t much for cooking start by eating simple meals at home and swapping one or two meals out a week with less expensive convenience meals from your local grocer.
It’ll save you some money and help you ease into eating and then cooking at home more often. I’d rather you start small with a problem area than try to go cold turkey and give up after a week or two.
GET RID OF THE HOLIDAY FINANCIAL HANGOVER WITH A NO-SPEND CHALLENGE
It may make sense to do a no-spend month in January to recover your budget as soon as possible. February is also a great month since it is a few days shorter. I have a previous post called 3 Tips to Survive a No Spend Challenge you can read.
Kick your bad spending habits or debt to the curb as quickly as possible to recover your budget and get back on track. If you would be interested in doing a no-spend challenge with a Life on a Dime in the new year please let me know in the comments! I’ll also put up a poll on social media.
This can be a great way to start the year out right even if you don’t’ suffer from a financial holiday hangover. What better way than to do it with friends and give yourself an added layer of accountability. Let’s get the budget back on track as soon as possible.
I try to do a minimum of three no-spend days a week. It is much easier than tackling a full month or year. Since I am a stay-at-home mom and our two-year-old has appointments in the next-largest town I save any “in town” errands for those two days. Mostly this saves money on gas but also prevents a lot of unplanned purchases. I limit online shopping to once a month just to make things easier as I have to drive into the post office to pick up packages.
aPPROVED SPENDING ONLY
If it isn’t in the budget, don’t buy it. It’s as simple as that. Talk with your spouse or accountability partner (these are great to have and keep you in check) on a regular basis about purchases or expenses coming up. Build what you can in your budget and table the rest. Prioritize needs over wants. If it doesn’t fit, revisit it the next month. Chances are you will do fine without it.
Once you have all of your necessary expenses accounted for if there is any room left in the budget put it toward recovering from the out of control month. Do this as long as it is necessary. If you want to continue paying off debt or building savings up then press on while you have some momentum! Things get easier when you see the needle move!
THE NEW YEAR IS THE PERFECT OPPORTUNITY TO MAKE A FRESH NEW START WITH YOUR FINANCES
Whatever financial mistakes you made in 2019 do not have to be repeated in 2020. But you do have to pay for them. Recover from not so great past financial decisions as quickly as possible so you can build a healthier financial future.
I’m not talking about simply making “be better with money” a new year’s resolution. I’m talking about making a long-term commitment to improving your financial situation. Being a good steward of our finances requires diligence, dedication, and organization.
If you are new at budgeting, I have lots of helpful articles on the subject here on the blog. Subscribe before January 15th, 2020 and you will automatically be entered to win this Erin Condren Budget Bundle. With budget spreads, checklists, and functional stickers it will definitely help get the job of organizing your budget done and make it a little more colorful!
While past financial mistakes can slow you down, you can recover the budget and make better choices going forward. Keep going, learning, and working on that budget. So what are you waiting for? Get frugal and then live frugal my friends!