How To Complete A Budget Review

When I started budgeting, I would set out our categories based on what we had spent previously and naturally thought that this was what we would continue to spend in those categories. The problem with that mode of thinking is that it doesn’t account for what was spent in my budget categories. Remember, a budget is an estimate, not the actual. To know how much was spent in each category, I needed to understand how to complete a budget review.

What is a budget review?

A budget review is a series of steps where you thoroughly evaluate your finances, and make any necessary adjustments. While it sounds simple on the outside, this is one part of personal finances where people tend to make mistakes: the adjustments.

why do I need to review my budget?

Simply put, knowing how to complete a budget review will help your overall financial health. Now it may seem like a lofty statement, but here’s how a budget review will achieve that for you.

• You have an improved financial awareness by understanding your spending habits, as well as what your actual income and expenses are.
• When you regularly review your budget, you can identify categories with consistent overspending. You can also easily adjust overspending before it becomes problematic, such as adding more debt. This means you have more control over your finances.
• Completing a budget review allows you to see what areas in your budget can be reevaluated, and give more opportunities for reaching other goals, such as savings.
• goal achievement and stress reduction
• financial flexibility and prepared for life changes

how to complete a budget review

Completing a budget review is much easier at the end of a pay cycle. Since my income at the time of writing this is once a month, I review my budget before the next paycheck cycle. While you could review your budget weekly, it is ideal to have a rough monthly estimate of your expenses. This allows you to see your true expenses throughout the month.

The beauty of a budget review is that it allows you to make notes about this particular budget, and makes it easier to compare to past budgets, or for future budgets to be compared to.

Gather Your Supplies

• Your Budget
• Calculator – I prefer using a TI calculator*, but any calculator will do*.
• Pens of various colors* – I like to use various colors to help draw my attention to particular areas
• Highlighters* – same as with the pens, it helps draw your attention to a particular area of the page.
• A notebook or my budget review bundle – for thoughts and comments about your budget as you review it

Start With Your Income

With the zero-based budget I set up at the start of the pay period in front of me, I start at the top with my income. How did the actual income compare to the income I had budgeted, or estimated?

Using your notebook, or the sides of your budget worksheet, you can make notes on what was different this month than what you had anticipated. This will help you as you go through and review the month.

Review Your Expenses

Reviewing your expenses goes much easier if you have been tracking your expenses regularly.  You can learn more about how to track your expenses, and how I track them, here.

As you review your budget, note anything that stands out. Some examples can include:

• Fixed – Have any bills increased in price? Did a promotional, or interest-free period end?
• Variable – What categories did you overspend in? What about underspend? Do these categories need to be adjusted? In other words, is this difference in your estimated spending a trend or a fluke?
• Irregular – What expenses this month are anticipated to return in a few months? (I call these non-monthly expenses in my budget). Add these to your calendar, a Year-At-A-Glance, or note it on the budget that it is anticipated next.

Savings & Sinking Fund Contributions

Review your savings contributions, sinking fund balances, and emergency fund balances.

Did you meet your savings goals for these accounts throughout the month? Are there upcoming expenses (such as repeating, irregular expenses from the previous step) that you need to save for?

Assess Your Debts

Did you pay anything off this pay period? Allocate that money to the next debt you intend to pay off, or to another budget/savings category.

Did you add any debt this pay period? What can you do to prevent that in the future?

Identify Any Adjustments That Are Needed

With the questions above, you should be able to identify necessary adjustments to make on your next zero-based budget.

Now that you have that information, make a plan for the adjustments.

Set Financial Goals

Set goals around the adjustments you’ve identified. Small steps are what will help your budget change dramatically.

Completing a budget review helps you effectively manage your finances, make informed decisions for improving your financial health, and ultimately reach your financial goals in small increments. have you completed a budget review before? Let me know in the comments below!