If you have a set budget for every month, and have found that you can pretty much keep it every month. You may not give it much thought. If you are using the envelope system then you stop spending when you are out of money. If you have an emergency fund or sinking funds set up, then you use those to cover emergencies, and put your extra money into building those accounts back up. At this point, your budget is not going to be something you focus on all of the time. There are several events that will cause to reevaluate or set up a whole new budget. Here are five events and the areas that you need to consider adjusting.
1) One event that brings about major financial changes is the birth of a child. This is especially true if it is your first child. You will want to consider the cost of childcare if you are planning on working after you have your child. You will need to take into account the increase in your insurance rates and medical bills. You also need to take into account the cost of clothing, food, diapers and the other things you feel your child needs. Fortunately you have time to prepare for these changes.
2) Another time to reevaluate your budget is when you become debt free. If you have been working at aggressively paying off your debt, then you can allow yourself some extra breathing room in a few of the categories. It is also important to funnel at least half of that money into savings. This can retirement savings, or savings for your children’s college. This is a fun time to reevaluate your budget because you get to decide where the extra money goes.
3) Whenever you or your spouse starts a new job you will need to adjust your budget. Hopefully the new job will mean a pay raise, so you can decide what areas to put the extra money into. You also need to consider how the benefits may have changed and adjust your budget accordingly. If your co-payments or deductible is higher you will need to set aside more money in those categories.
4) Once your children are grown and out of the house, you should find yourself with a bit more money. This is another fun to time to adjust your budget. You most likely will be nearing retirement, and so you may want to save more aggressively. You may also want to begin to take time to enjoy the finer things in life.
5) When you do actually retire, you will want to sit down and design a basic budget for yourself. If you have planned well, it may include deciding how many trips you can take each year. It is important to be conservative with your money, so that it will last as long as you need it.
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