2022 is almost over! If you’ve been following along with our 12 Months to Financial Fitness series this year, you know we talked about creating budgets in February. If you haven’t already since you first created your budget, it may be time to make some adjustments.
Why You Should Update Your Budget
Let’s do a quick thought experiment: think about your life 10 months ago. Are you still living in the same place? Have you gotten married? Were you promoted at work? All these (and more) are changes that can significantly impact your finances and your budget by association.
Small changes can also change your budget as well. For example, if one of your goals was to pay off your student debt, and you’re close to achieving it, you need to consider what you’ll do with money you were dedicating towards that goal. On the other hand, if you’ve come into unexpected expenses, you need to consider these when re-evaluating your budget to work on paying those debts off.
The Impact of Inflation on Your Budget
A hot-button issue for several months now and likely many more to come, inflation has been wreaking havoc on finances in Florida and beyond. Rising food prices are just one of many extra costs that consumers are incurring. A budget made 10 months ago is going to be very different in today’s economic climate, as dollars don’t go as far as they did previously.
This will throw any budget into disarray! A $400 a month grocery bill can grow to $500, $100 you didn’t initially budget for if you’re still using an old budget. Because of this, you may need to pause on certain savings goals or cut expenses to make sure you can get all of your bills paid without dipping too much into your savings.
How Often Should You Update Your Budget?
We generally recommend you update your budget every quarter, four times a year overall. Three months between budget updates gives you a good sample size to look back on. You’ll also avoid falling prey to making adjustments based on just a good or bad month. If your quarterly evaluations don’t have your budget change much, you can certainly switch to every four months or three times a year.
We also advocate not making changes just for the sake of making them! If you expenses are paid and your financial goals progressing well, there’s no need to make changes aggressive changes. If it ain’t broke, don’t fix it!
The Year Draws to a Close
We’ve almost reached the end of our financial fitness journey. We’ll be doing our annual review next month, and we’ll share plenty of ways to evaluated how your financial fitness journey unfolded in 2022.