"Why do I need to rewrite my budget every month?" It's a common question we hear and an understandable one as it doesn't seem to make a ton of sense to do so, at first.
At first blush, it seems like once you've gotten it down, it really isn't going to change that much from month to month. But "oh contraire mon frère". As you'll soon see (usually after a few consecutive months) it actually does change even if ever so slightly.
So, while it can be a bit of a head scratcher at first as to why it's necessary, there are four solid reasons you want to get into the habit of rewriting your budget every month:
1) Your budget is actually never the same every month.
2) Rewriting every month helps you plan for those pesky "irregular expenses" that can seem to come out of nowhere.
3) Preparing for a new phase of life, like changing jobs or having a baby will make in necessary to anticipate emerging expenses.
4) We’re developing a skill and a habit, that if adhered to, can help you become super financially healthy in a relatively short span of time.
The easiest way to explain why you would want to rewrite your budget every month is to point out the not-so-obvious-fact-at-first that your budget, even though it's "the same" every month, will always have variations, either in dollar amounts or categories owed.
Remember, precision practice makes permanent...
If you're not accounting for these "slight" changes in dollars and pennies with precision, they will throw this whole budgeting thing into a ditch and fast.
I've seen it a thousand times and you may have had this experience already.
In fact, not rewriting every month is one of the biggest causes for new budgeters and debt eliminators to “fall off the bandwagon” when it comes to budgeting and debt elimination.
The discrepancies are small at first, but can add up to intense frustration that lead to avoiding the whole exercise all together.
We want to avoid that and instead build a solid and sustainable budgeting habit.
Unfortunately, the fallacy, especially for newer budgeters (yes, I did it too), is that once you have the budget "set in stone", there really isn't that much that should change every month, right?
Well, wrong actually. When it comes to budgeting, there actually is no "set in stone".
I'll explain more in a second but first, let me ask you a few questions to illustrate the point:
Think back for a moment. How many months has your electric bill been the same? What about your water/sewer bill? What about your gas bill? You get the picture.
Then, what about those pesky irregular expenses like: bi-annual car insurance expenses, kids outgrowing clothes, birthday and holiday gifts (we’ll talk more about those in a minute)?
So you see, "set in stone" is actually never set in stone. Yes, there will be things that don't change, but that's not going to be the rule AND it certainly isn't a good reason to NOT rewrite.
Think about it this way. What if you could sleep peacefully at night, knowing that every aspect of your budget had been reevaluated and rewritten every month and that no penny was left unaccounted for.
Well, I’m here to tell you that it’s possible AND I’m going to continue to encourage you to do it while showing you how it's done.
By the way, if you're new to budgeting and are looking for free forms so you can follow along, you can find them here.
One of the single biggest arguments for rewriting your budget every single month (and my wife and I still do this after over a decade of budgeting) is the fact that it keeps you on top of those (potentially) super annoying irregular expenses.
I cover this topic extensively in this blog post: How To Budget For Irregular Expenses. It’s worth your time to read, I promise.
Irregular expenses are the ones that are probably blind siding you right now if you're still somewhat new to this budgeting thing.
Like, "ugh, I totally forgot that we need to buy school supplies again" or "I can't believe he outgrew his shoes again!”
Typically, your first 90 days of learning how to budget are spent just getting a grasp on the basics, the numbers, the categories and what's been left out.
Then, once you have those down, there's always something unexpected and it usually comes at the most inopportune moment!
Many times, a few of those irregular expenses just so happen to fall into the months when you’re really starting to get a handle on everything (right?). This is where frustration can set in and sabotage the whole deal. I'm here to tell you it's normal, so please don't let it push you off the bandwagon.
I want you to be prepared both for the ones you can see right now and for the other irregular expenses that you’re likely not yet thinking about during your first 90 days (like school supplies, vehicle registrations, insurance policies (billed annually or semi-annually), wedding anniversaries, Christmas gifts, birthday gifts, license and passport renewals, annual subscriptions, conference fees, tuition, books, taxes).
By the way, here's a list of 11 Irregular Expenses You Probably Forgot To Budget.
So, go ahead and begin the process of thinking through and writing down every irregular expense you can remember, even if it's on a separate sheet of paper apart from your actual budget (hint: you may want to go back through checking account records or credit card statements) and make a list.
With this list, we’ll begin to employ either the “Line Items” or the “Miscellaneous” budgeting category strategies. That territory is covered more in depth in this post: 2 Strategies For Predictably Budgeting Irregular Expenses.
So, imagine the future with me here for a second, if you would. Apart from the dollar fluctuations of your utilities, what if you could live in a world where you were no longer surprised by these pesky irregulars. How awesome would that be?
Well, I’m here to tell you that IS awesome and that it’s totally possible, IF you start rewriting that budget every single month.
Writing out a new budget every month will help to keep you looking ahead for the next phase of life's expenses.
I recently sat down with a couple to review their budget as a result of them finding out they were pregnant. What an exciting and at-the-same-time sobering meeting!
They are thrilled to be having a baby and the event has only strengthened their resolve to get more precise with their budgeting and finish eliminating their debt.
One of the things we uncovered during our session was that they hadn't thought to put their emerging baby expenses into the budget up to that point.
Totally understandable with the newness of the information, but something we want to start thinking about and budgeting for, asap.
So, if you're entering a new phase of life like our pregnant friends, set about doing some estimates, adding some dollars to a few categories and creating some new ones.
Each new emerging season will have it's own particulars so that's why you want to start thinking about it as soon as you can.
The emerging expenses that come with this upcoming change of phase are usually not all apparent at the at first and can cause you to have to radically change your money plans as the appointed time approaches. We want you to be as proactive and prepared as possible.
If you're already used to rewriting your budget every month, this will be less of a monumental task than if you've not touched the budget "template" in six months to a year. So keep that in mind as emerging life events start to come into view and you'll be way ahead of the game.
So with this whole budgeting endeavor, we’re developing a skill and a habit, that if adhered to, can help you become super financially healthy in a relatively short span of time.
It's all about building the skills and the habits.
After budgeting for just a few short months, clients often mention that it feels like they've "gotten a raise". While it may not be true numerically, it is indeed true in terms of how you're putting stronger eyes on what's coming in and what's going out.
Any prolonged attention to that is bound to cause you to change your habits and give you that sense of "getting a raise".
Millionaires have typically developed their budgeting muscle to a very high and precise degree. In his book, "The Millionaire Next Door", by Thomas Stanley, he goes into great length about the money habits of real American millionaires.
A common thread among them is their ability to play both economic offense and economic defense, exceedingly well. Budgeting, as you can imagine, is a very strong part of playing economic defense.
You will be MUCH more cognizant of every dollar you earn and every dollar you spend.
Like I said earlier, the more times and the more intently you look at those numbers, the more you will develop a vigilance about making every single one of them count. It's a pretty awesome phenomenon I've seen develop in clients over the years.
In this new found vigilance you garner in more precise budgeting, you will also naturally start to look at how you spend your time earning money VERY differently.
You will start to look beyond your current situation and begin to visualize a much more financially stable and prosperous future.
Along these lines of thinking, I constantly recommend the following two books to clients, particularly around this idea of looking beyond your current situation.
1) "The Millionaire Next Door", by Thomas Stanley
This one will get you thinking...
2) "Your Money Or Your Life" by Vicky Robins and Joe Dominguez.
One of the absolute best books on personal finance there is!
Whether you're new to budgeting or trying to get back on track, rewriting your budget every month will be the glue that helps you bring all the elements of your emerging financial picture together.
It will help develop both the awareness and the discipline you need to win with money.
It will help you to keep those irregular expenses in check while simultaneously helping you to see and be financially prepared for emerging opportunities and challenges as you move through your life.
The most successful clients I have coached over the years have both eliminated debt and build wealth more rapidly by practicing the habit of monthly budgeting.
It's a skill you won't regret you took the time to develop!
Be sure to tell us how it's going and where you need help.
0. Stop All Retirement Investing (Until Step 4)2. Starter Emergency Fund of $10003. Eliminate Debts Smallest To Largest (a.k.a The Debt Snowball)4. Full Emergency Fund of 3-6+ Months’ Expenses5. Invest A Minimum of 15% Income Into Retirement Accounts (and increase savings rate to 50%+ if possible)6. College Funding (if applicable)7. Pay Off The Home Mortgage8. Build Wealth, Serve, Be Ridiculously Generous And Go FI (Financial Independence)!