Image source: Getty Images
Should a new year mean a new household budget?
Key points
- Budgets help you prioritize what you spend money on.
- If your budget is too restrictive or no longer matches your income and expenses, it may be time to revise it.
Budgeting is one of the best personal finance moves you can make. When you create a budget, you can ensure you’re spending your hard-earned money as wisely as possible to accomplish financial goals — and to do the things you enjoy. Budgeting can also help you avoid living above your means, which can sometimes lead to credit card debt.
But if your budget doesn’t work well for you, you won’t get the benefits that the budgeting process is meant to provide. The start of a new year is a good time to assess whether your budget is paying off for you and, if it isn’t, to make a change.
So how do you know if it’s time to edit your spending plan? Here are four signs that you may want to rethink your budget in 2022.
1. You feel too constrained by your budget
Budgets are supposed to be a spending guide that helps you. They aren’t supposed to make you feel like you’re deprived or cause you to resent your spending plan. If you feel like your budget is too limiting, then it’ll be much harder for you to stick to.
The good news is, there are lots of different budgeting methods to choose from. If your current approach isn’t working for you, consider a 50/20/30 budget that offers more flexibility. This type of budget doesn’t account for every dollar, giving you more freedom to spend as you’d like.
Here’s how it works:
- You cap fixed costs at 50% of your income (like housing and transportation costs).
- You save 20% of your funds in places like a savings account and retirement fund.
- You can spend the remaining 30% on whatever you’d like.
2. You’re having a hard time sticking to your budget
If you routinely go over budget, then it isn’t a good spending plan for you. Instead, it becomes more of a wish list or an aspirational document that doesn’t help improve your financial situation.
If you’re finding it difficult sticking to your budget, it’s time …….
Source: https://www.fool.com/the-ascent/personal-finance/articles/should-you-rethink-your-budget-in-2022/
