This post is from our regular Wednesday contributor, Erin.
Budgets always need to be looked at and evaluated periodically. This is because the circumstances we find ourselves in are constantly changing. Our financial needs are quite possibly going to be different every month.
For example, when my fiance and I relocated earlier this year, I went through our budget and made adjustments. It would have been silly to keep our budget the same, as prices were not going to be the same between both places.
We found out pretty quickly that our $250/month grocery budget wasn’t going to work. Sometimes, when it comes to budgeting, you can’t force your spending down to meet a certain threshold no matter how hard you try, and it’s discouraging to keep trying.
It doesn’t make any sense to create one budget and try to stick with it forever. I’m a big believer in making constant tweaks to both spending and budgets for that reason. Things change, and we have to adapt.
Since we’re coming up on the new year, I thought it would be a good time to go over what you need to review to make sure your budget is good to go for 2015, and why it’s a good idea to review your spending at the end of the year.
Review Your Total Yearly Spending
This is the obvious first step. Before you can actually go through and revise your budget, you need to tally up what you spent for the year. This sounds super tedious, but if you’ve been tracking your spending consistently all year, then it shouldn’t be too time consuming.
Either way, we already went over the reasons why you need to be tracking your spending, and many who commented said it was an eye-opening experience. You can only imagine how totaling everything up will feel! I’d say it’s well worth the time investment if you know you have areas you can improve in.
Analyze and Figure Out Patterns
Did your spending peak at a certain point in the year? Was that correlated with an event? You need to analyze your spending with a critical eye now, and figure out the patterns behind your spending.
For example, we moved in April, so it’s not surprising that our one-time expenses were huge during that time.
Maybe you have a couple of large one-time expenses due in a certain month or so every year – like prepaying an insurance policy or getting your annual checkup at the dentist/doctor/optometrist. Many bloggers advocate saving for these expenses every month, as so many people get caught by surprise when it comes to these things.
Whatever the reason, looking at your spending and identifying patterns will help you to establish an accurate budget for next year. If you know a big expense will occur in May, you can set aside cash from January until then so you don’t get blindsided.
Think About Any Changes You’ve Experienced, or Will Experience
Will 2015 be a year of change for you, or did you get most of the major events out of the way in 2014?
Like I said, for us, we moved earlier this year, so this was definitely an unusual year when it came to spending. It took a while for everything to even out and for us to find a groove. Therefore, I’m really hoping that 2015 will be more of a return to normalcy.
But maybe you’re expecting a baby in 2015, or are planning on buying a house. Major life events like that tend to have a ripple effect, and your budget isn’t exempt from them.
No one can predict the future, but it’s better to prepare and at least think these things through.
For example, because we knew we would be moving, we didn’t place as much emphasis on our student loans between the last half of 2013 and this year. W were too busy saving! However, since we should be staying put next year, we can finally put the focus back on our loans.
Or maybe 2014 was the year you paid off your debt, and now you’re looking forward to saving for your goals. Your budget and spending are definitely going to change in light of that!
There’s a fine balance between what you need to spend on and want to spend on. Don’t let your needs win out so much you don’t get anything you want.
Reflect – Have Your Values Changed?
There I go with values again! Just as our circumstances change, our values are also apt to changing, especially for us young adults. We’re taking so many different paths these days, trying to figure out which one we like best, and in the process, we figure out what’s important to us, and what’s not.
I know my own values have changed over the past few years. In a previous post, I explained that college-aged me placed more emphasis on being frugal and spending the least amount possible, as opposed to earning more.
However, I’ve learned (like so many others) that the quality of an item should factor into the equation, rather than just price. I purchased a higher-end laptop earlier this year that reflects that change in thought.
After thinking about how we spent (or didn’t spend) our money this past year, I got to thinking – how did our spending benefit us?
I wasn’t really happy with the answer. With the move and me not having much income the first few months after that, we were on lock-down. I was afraid of spending anything outside of our budgeted amounts.
I don’t want that to be the case in 2015. I’ve made the shocking realization that some things are truly worth spending on, and I shouldn’t feel guilty about it. There are so many people out there telling us what we should and shouldn’t do with our money, and it can be difficult to tune that out!
The key here is to spend on things that matter to you, right?
Even if your values are a little unconventional, stay true to them. Don’t let what other people say influence your spending decisions. If you’re not happy, you have every right to experiment with your spending and make changes.
I think you’ll know if you’re satisfied or in need of a change once you review your total expenditures. I know I always get a gut check when I review mine!
___________
Last year, I didn’t do much active reflecting on our total expenses. I posted about it on my blog, and everything seemed to check out. It was mediocre. We did fine, but nothing really excited me about it.
This coming year, I hope to change that. I’ve probably been a little too strict with our spending this year, and after some reflection, I don’t think it’s worth the deprivation. Have you ever come to a similar conclusion?
Will you be reviewing your total spending for 2014 soon, or have you already reviewed it? What were your reactions? Are you going to change your budget up in 2015?
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We’re planning to review our full 2014 spending later this week and I can’t wait! But then again, I love this stuff and realize I may be in the minority with how much I enjoy reviewing our spreadsheets… ;). I think it would be nearly impossible to make plans for the new year without a thorough review of last year’s spending. I like to see trends over time and make predictions and goals based on those. Otherwise, I’ll set myself up for unreasonable goals that would be impossible to achieve. Better for me to be grounded in reality!
We reviewed our 2014 spending already. We budget on a monthly basis so I was already fairly prepared for it. Our budget will stay the same for 2015 aside from a few small tweaks.
My favorite part of this is reflecting. I think it’s often overlooked, which is a big mistake. I am going to be reviewing and reflecting today – I’m looking forward to it!
I need to do some serious reflecting on my grocery budget. It’s still the biggest sore spot in my budget but I still have a hard time reconciling it because I hardly eat out and I want to eat super healthy food, AND I have what seems to be a bigger appetite than most people. lol! Still, it’s something I need to work on. I’ll also be keeping my budget really tight even if work starts to really pick up, just to make up for the slow months I’ve had work wise.
I don’t see any huge spending projects next year other than some work on rental properties. It is kind of fun to see what you spend money on for the year. I’m hoping to spend less on taxes next year!
Mrs. Frugalwoods Haha, I love reviewing spreadsheets, too! Trends are always good to know, and the more things you have to worry about paying, the more important it is to be aware of them.
Holly at ClubThrifty Nice! Consistency is always to be appreciated.
theFinancegirl Totally agree! I’ve been doing a ton of reflecting lately and it’s really opened my eyes to what I truly want to be spending on, and what I can do to get there.
Beachbudget My fiance has a huge appetite, but I have a a smaller one, so we tend to balance each other out. I do hear you on that, though – it’s frustrating when we have no leftovers! I’m with you on keeping the budget tighter if/when work increases. This year has been a strange one in terms of income for me.
Eyesonthedollar So glad to see others agree that it’s fun! I am not looking forward to taxes at all now that I’m self-employed. Eek.
We like to review our spending for not just the past year, but also the difference from the previous year. If there were increases, we figure out why, and if there were decreases, well then we do a little happy dance. We’ve already set the changes to our budget for 2015, at least for the start of the year, because it’s always subject to revision.
Gary @ Super Saving Tips That’s great if you’ve been tracking your spending for 2+ years. Good for you!
Gary @ Super Saving Tips I agree with DC – it’s awesome that you compare your spending between different years! It’s definitely worthwhile to do if you’ve been tracking your spending for a while. Budgets are definitely always subject to revision, but it’s great to outline what the year will look like!
DC @ Young Adult Money Erin @ Journey to Saving Believe it or not we’ve actually got 8 years of financial tracking data sitting in Quicken (and my wife has a few additional years of data from before we got married). For fun, I’ll have to compare 2007 to 2014 and see how we’re doing!
Normalcy is always nice. We’ve had a few big life changes the last 3 years but I don’t forsee any major ones this year so that should result in increased savings. Hopefully.
Gary @ Super Saving Tips DC @ Young Adult Money Erin @ Journey to Saving Wow that’s pretty incredible!
thebrokeprof Yes, I’m definitely hoping this year has a few less bumps!
I love that you included reflecting on your values – this is so important. I’ve decided I’m okay with spending money on the things that are important to me and also that I should prioritize experiences (ie travel) over things.
Hi Erin, we regularly review our budget for patterns. Its not a large one off amount but one of the patterns that’s bugging me right now is the excessively high cell phone bills. Its about $150 a month for both my wife and I. Our goal for 2015 is to cut this down significantly. Cutting even $100 a month would help us save an additional 4%!
skyvsworld So happy to see others taking their values into account! I think our values can change from year to year (I know mine have), so it’s important to check in with yourself to make sure what you’re spending on is still making you happy.
Thomas at ineedmoneyASAP I hear you on that – I was with Verizon for a while, and when I started blogging and sharing my budget, the $90/month bill was a thorn in my side. I switched to Republic Wireless in January and have been very happy with my $31/month bill! If you don’t want to switch providers, it’s definitely worth calling and asking if they can give you a discount.