Monitor and Adjust Your Household Budget
Having completed the Household Budget you are now in a position to improve your personal finances. Most of the hard work has been done. Now your task is to review each expense line item to ensure you are spending your hard earned income wisely.
Again, for each expense listed in your budget, you should ask yourself the following questions.
- Is this expense item a “need” or a “want”?
- If it is a need are you getting the best value for the money you are spending? You must ensure that you are not over paying for the item. A budget helps you to question and examine the cost and benefit of each expense.
- If the expense item is a want, you should ask if it is important to your lifestyle? If not, then it can be eliminated. If it is important, then again are you paying too much for the item? You may have committed to the item expense years ago not realizing that you can pay less for the same item today. Sometime it is as simple as asking the item's provider to give you a better price or maybe a competing provider can lower your costs.
- Is the expense item permanent or temporary? Many expenses have a limited life – children’s activities, education costs, car payments, mortgage, RESP Contributions, etc. Understanding the expense item’s time frame can often help you to adjust your spending to ensure the most successful outcomes. Accept that financial and lifestyle circumstances change and your budget must be flexible to adapt with those changes.
- Is the item a duplicated expense? For example, under you employer or privately, you may be paying for extended medical, dental and insurance benefits you already receive from your spouse’s employer. Many expense decisions are made in isolation of each other and, thus, you may end up paying for the expense twice.
Where you can, try to eliminate or reduce the amount you spend for each expense item. Even if you are able to increase your savings by $50.00 a month, the budgeting exercise has been a success. Do not be afraid to change service providers if an expense begins to increase without a corresponding increase in the benefits you receive. Remember the vendor works for you, not the reverse. If you notice a particular expense is rising, then make a call to the vendor and ask why and how can they reduce your costs? You may be surprised in their response. Every dollar that you are able to hang on to will help you toward achieving your financial goals.
Your household budget should be updated and reviewed at least twice a year to ensure that your expenses remain in line with the product and service benefits you are receiving. Some people chose to do their budget reviews in December and June and some prefer March and September. Select times that are convenient to your lifestyle.
Your household budget is the backbone for establishing realistic financial goals like saving for your retirement, helping to pay for a dependant’s education, save to purchase a family cottage, take that big vacation, or to be able to quite your job and pursue your passions. The household budget is a practical and powerful financial tool.