Jerevie Canlas, Ph.D., CFLE
Whenever we teach a budgeting class, we always emphasize that there are five pieces to every budget. Every budget should have the following elements: Income, Expenses, Expense Limits, Tracking/Monitoring, and Review and Evaluate. When people budget, the first four elements are relatively straight forward. The last element, however, might be what makes or breaks your budgeting strategy.
We hear this a lot - “make a budget and stick to it.” For the most part, this is true. A budget is just a spreadsheet or a piece of paper with your plan, and will work only if you implement it. And when you implement it, you get a better picture of your finances and are able to make changes to your financial behavior if necessary. Doing so allows you to achieve the financial goals you set for yourself - which is why you’re budgeting to begin with.
Life happens, things change, and so should your budget. This is why reviewing and evaluating your budget is important. A common mistake a lot of people make is thinking that their spending plan needs to be consistent to become effective. What actually needs to be consistent is you having a budget. Your budget, on the other hand, can be adjusted accordingly. How much your budget changes depends on you. As you monitor your gains and expenses, you will typically see patterns in your spending. Based on these patterns, you might need to make changes in your budget so you can align it with your financial goals. Here are three things to consider before you set your next month’s (or next year’s) budget:
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