Creating a budget is a great way to keep track of your spending and avoid landing in debt. It’s also a good way to meet whatever financial goals you set, like growing your savings account or coming up with a down payment to buy a home.
But sometimes, budgets get busted for different reasons. It could be that you encountered a string of home repairs that forced you to spend more than you initially anticipated. Or, it could be that your bills rose due to inflation — an issue many consumers have grappled with since the summer.
Either way, if you blew your budget in 2021, try your best not to get discouraged. Now that a new year is approaching, you have a solid opportunity to get back on track. Here’s how.
1. Figure out what went wrong
Maybe your budget got blown due to circumstances outside your control. Or maybe revenge spending kicked in during the pandemic and you went a little overboard at several points during the year. These things happen. The key is to figure out why you didn’t stick to your budget.
It could be that you didn’t use accurate figures when setting up that budget. Or, it could be that your expenses rose at such a rapid pace you simply couldn’t keep up. Knowing what went wrong could help you avoid a repeat.
2. Update your budget with new information
Maybe your rent rose in 2021 and it’s now $60 more per month than it was when you set your budget. Or maybe you’re now spending $500 a month on groceries instead of $450 because the cost of food has soared.
In order to make your budget effective, it needs to be accurate. Now’s a good time to rework those numbers and make sure they’re up to date.
To this end, comb through your most recent bank and credit card statements — say, four to six months’ worth. That will give you a sense of what your various bills now look like. And from there, you can set up a budget that may be more realistic to follow.
You may re-run the numbers for your budget only to find that suddenly, your paycheck won’t suffice in keeping up with your expenses. At that point, you have two choices — boost your income or slash some bills.
If you’re spending a lot of money on things you don’t need and can manage to part with, then the latter may be doable. For example, if you’re really only using your gym membership once or twice a month, canceling it shouldn’t be such a blow. But if you’d rather not live too pared-down a lifestyle, consider boosting your earnings with a side gig.
There are many different side hustles you can choose from, so think about what your schedule looks like and find a gig that’ll fit into it the most seamlessly. If your work schedule is fairly unpredictable, you may need a gig whose hours you can set yourself. But if you typically get out at the same time every night, you may be able to easily pick up some evening shifts at a local business to pump up your earnings.
The start of a new year is an opportunity to set yourself up for financial success. Don’t focus on the fact you faltered in 2021. Instead, look toward the future and have confidence in your ability to get on a solid path.