We are strong advocates of personal finance and love to see the growing trend of money management and budget plans finally take the center spotlight so that more people increase their financial literacy and secure themselves a better position in life for the long term. In fact, despite all the challenges brought about by the Covid-19 global pandemic, it has taught many families the importance of resilience, flexibility, and the willingness to learn anew for when it counts.
However, we see far too many families and individuals make one common mistake: using the same old budget plan from a year and a half ago. The circumstances were far more different, meaning that they’re running on outdated numbers and analytics. And while it might not seem like the biggest of issues in the world, you’ll be surprised to find out that outdated budget plans can do more harm than good.
Circumstances Change And Cash Flows Evolve
Although it might sound cliche to say that the one constant in life is change, there’s no denying that everything does keep changing, and your circumstances and cash flows will be entirely different in just a few weeks. Therefore, imagine how much change your balance sheets have gone through and connect the dots on why it’s financially unhealthy to be running the same budget plan from a year ago. As a result, you’re either under-representing your income or vastly overestimating your take-home pay!
- Under-representing Your Current Income: While being the less dangerous case scenario, under-representing your current income means that the excess is going elsewhere and not being put to good use. So, you might be incurring all these unnecessary expenditures in the background when you could’ve been enjoying some modest upgrades or reached your financial goals much faster.
- Overestimating How Much You’re Making: On the riskier side of things, you could be digging your financial grave without being conscious of what’s happening, and because you’re paying for more obligations, you might be coming at a net loss month after month. Sure, if you haven’t noticed yet, then that means there’s still some room to come back stronger, but it does dampen a lot of your progress and put you back to square one.
When Should You Consider A Budget Plan Evaluation?
Luckily enough, it’s that hard to spot a major turning point in your life or an important event associated with your finances. So as long as you can keep a level head of the circumstances, you’ll know exactly when to re-evaluate your budget plan. Namely, you’ll want to proceed with a budget plan evaluation when (1) employment opportunities, (2) marriage & family, (3) financial fallout, and (4) paying off debt.
- Landing A Promotion Or Getting A Raise: Things have been looking up, and the US economy is expected to be bullish as well; and if you’ve found yourself in the same lucky position of getting a raise or promotion, then that will call for a budget evaluation. More take-home pay means the ability to pay more, so you’ll want to allocate them accordingly for debt payments, savings plans, long-term investments, and the like.
- Baby Steps For Family Planning: If you and you’re significant other are finally considering settling down and starting a family, then this important life event will call for a budget evaluation. While combining two households does mean more breathing room in the expenditure department, adding a new family member does mean newer expenditures to come. Plus, you’ll have to start thinking about an education fund too.
- Surviving A Bad Financial Fallout: Not all people were lucky enough to come out of the global pandemic unscathed, and if you’ve just been through a rough patch of surviving a bad financial fallout, then it’s time you gather your financial bearings as well. Don’t expect to come out with the same budget plan intact because some expenses will have to go, so try to cut out things you can do without for the meantime to give you some breathing room.
- Finally Paying Off A Huge Debt: Last but not least, on the brighter side of things is finally paying off a huge debt, and that means you can finally allocate those would-be monthly debt payments for something else in your life. For example, you could finally invest a little more into your side hustle by purchasing wholesale through Banner Solutions or maybe onboard an extra member to your team. The idea is to expand and improve upon this better financial position.
If You Can Change, So Should Your Budget Plans!
In conclusion, if we can go through many changes and transformations in just under a year, then expect that your budget plans and cash flows will be capable of doing the same. So, before you consider yourself safe and secure in personal finances, never forget to re-evaluate and double-check your current budget and expenses.