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While many of my articles have focused on starting a budget, I understand that many of you already have a budget. And, for all intents and purposes, it may be working well for you. But in the same way that every few years your house needs a few renovations, it’s important to approach your budget in the same way. Out with the old and stale and in with the new and fresh. Is it time to revamp your personal budget?

But before we get started on how to revamp your personal budget, there are a few foundational rules that are worth a reminder.

Budgeting has a 5-step purpose:

  • It helps you to track your spending
  • A budget helps to ensure you’re spending less than you earn
  • It allows you to pay yourself first
  • Budgeting helps you to prepare for the future
  • A budget helps you to monitor your financial health

Take a look at this infographic below for more details.


How to Know That You Need a Budget Revamp

A leaking roof. Peeling paint on the walls. Clogged drains. And rusting appliances. There are many signs that point to the need for home renovations. However, the signs are a little more subtle when it comes to the need to renovate your budget. But they’re there. And there are 3 that stand out for me personally.

1 // You’re not making financial progress

If your financial progress has stalled, there should be warning bells ringing. The entire purpose of a budget is for you to take steps forward towards financial freedom. If you’re struggling to live below your means or to pay the minimum balance of your credit card, you need to sit down and reevaluate why your budget isn’t working.

While it’s possible that certain life circumstances and unexpected situations may stall your financial progress, this should only be temporary. In the long-term, your budget should help you make financial progress.

2 // Your financial metrics are going in the wrong direction

I’ve previously written about 10 financial metrics that you need to be tracking. And the tool that helps you effectively track those metrics is your budget.

If you notice that your savings rate and net worth are decreasing, your spending is increasing or your personal inflation rate becomes bloated, realize that your financial metrics are going in the wrong direction. And this likely means that your budget is no longer serving you in the best way possible.

3 Budgeting doesn’t excite you anymore

If budgeting has become the equivalent of adult homework, then something is wrong. You’ve forgotten “your why”. And you’ve neglected the emotional purpose that underpins why you started a budget in the first place.

Budgeting isn’t supposed to be boring. It’s supposed to be a weekly or monthly reminder of the future that you’re working towards, of the legacy you want to leave for your children and of the freedom that money can give you – to do what you want when you want.

Oftentimes, budgeting becomes a chore when we subconsciously realize we’ve been failing at it. And that, my friend, is the perfect reason for needing to revamp your personal budget.

How to Revamp Your Personal Budget

Okay, so raise your hand if any of the above examples resonated with you. Those with their hands raised – you probably realize that you need to revamp your personal budget. But how do you go about it?

1 // Keep Budgeting Flexible

My first recommendation is more of a mindset shift. Ask yourself these questions and try to answer honestly:

Do I feel completely restricted when it comes to money?

Do I feel an immense amount of guilt when I overspend?

Is my budget too rigid for my lifestyle and/or priorities?

If you answered yes to any of those questions, your budget may not be flexible enough. Budgets are not supposed to be set in stone. They are an iterative process, requiring regular rounds of tweaks and changes – almost on a weekly or monthly basis.

And, more importantly, budgets should be appreciated as something that is personal. Life is often marred by this thing called “change”. Your current situation is bound to change as the years go by. Maybe you lose your job and need to cut spending in certain areas. Or maybe you get a promotion and, fortunately, have more money to put to work. Nothing is set. Everything is fluid. And so it should be with your budget.

Don’t create a budget and expect it to work for you all the way until retirement. Be flexible. Allow yourself some room to adapt it as your life circumstances change. And don’t ever feel guilty for it. The purpose of a budget is to ensure it is always working for your financial benefit.

2 // Stay Future-Focused

One of my favorite budgeting pastimes is to regularly remind myself of where I want to be financially in 5, 10 or 20 years. I’ll open up a spreadsheet in Excel and physically calculate how much my current investments might be worth by the time I hope to retire. I’ll play around with the numbers and try to figure out the best ways to maximize my money. I know – it sounds a little nerdy. But it helps me to stay future-focused. And it encourages me to play the long game.

I’m not suggesting that we completely neglect our enjoyment of the present. Because, let’s be honest, the future isn’t guaranteed. But neither is death. You have a 50/50 chance of surviving to see tomorrow. And I’d like to stack my odds to be prepared for it.

Don’t let the future consume you. But also don’t forget about it. It might be the missing puzzle piece in your budgeting breastplate – the part that protects you from budget breakdown.

3 // Get Serious and Specific About Saving

It’s possible to get serious about saving. And it’s also possible to get specific about saving. But each of those on their own is potentially money flushed down the drain.

If you’re serious about saving, you’ll likely squirrel away as much money as possible. But you won’t know the purpose of it. Maybe it’s for retirement. Or maybe it’s for a rainy day. Better yet, maybe it’s for an undecided future vacation. Maybe it’s just because you’ve been told to save money – since it’s apparently the right thing to do.

On the other hand, if you’re specific about saving, you’ve likely defined the exact reason for wanting to save money. Maybe it’s to visit family abroad. Or maybe it’s to put a down-payment on a house. But, even though you know your reasons, you’re not sure you’re serious enough yet to fully invest in chasing after those goals. Because you want to live in the present. You only live once, after all.

No no no, my friends. Your budget should be at the intersection between serious and specific. There’s no point in being serious about saving if you don’t know why you’re doing it. And there’s no point in knowing why you want to save money, but not being in the right headspace to chase after it.

And I’ve found that the only effective way at getting both serious and specific is by setting S.M.A.R.T.E.R. financial goals. Without goals, you’re not only directionless – you’ll also be undetermined.

4 // Acknowledge (and Possibly Work on Changing) Your Relationship With Money

Have you ever stopped to think about your relationship with money? Is it complicated? Does the thought of money drain all your energy? Or are you excited to see your bank balance each day?

We may not be aware of it, but we have subconsciously (or consciously) developed a relationship with money. And, sometimes, that relationship can have a pretty significant effect on our ability to budget.

Maybe you’re scared of losing money and, as a result, tend to be a neurotic saver. Or maybe you didn’t have a lot of it as a child and, now that you do, you’re making up for years lost living in poverty. Maybe money was always a sensitive topic at home – so now you’re trying to not pay much attention to it at all.

All of these relationships are extremes. The ideal situation is to reach a place of balance. You want to reach a point where you understand the importance of money, but it doesn’t consume you. You want to be able to spoil yourself every now and then, but to do it in moderation. And you want to prioritize saving money, but not to the point where life becomes unbearably boring and restricted.

Find budgeting balance.

5 // Remind Yourself of “your why”

Very often, we simply need to revamp our personal budget by reminding ourselves why we started budgeting, to begin with. It’s easy to forget “your why” when you get into the ho-hum routine of filling out spreadsheets with your income and expenses. If this happens, find creative ways to remind yourself what you’re hoping your budget will achieve. Remind yourself of why you started taking back control of your finances.

Maybe this means getting more emotional with the “title” of your financial goals. Instead of calling it an “emergency fund”, why not call it the “Peace of mind if I lose my job” or “Peace of mind if shit happens” fund. Instead of calling it “Children’s education fund”, rather call it the “In case I die, my children will be okay” fund.

I know these goals sound silly (and sometimes macabre) when you read them out loud. But, let’s be honest, they elicit more of an emotional response. And you’re likely to connect with them on a deeper psychological level. This will make it a lot easier for you to stick to your budgeting goals in the long-run.

O'Hagan is one of Personal Finance's New Voices and his finance blog is called the Saving Scientist

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