What to do when you go over budget

You would think because I do financial coaching and talk about money a bunch, that I’d be an ace at it and never have any problems.

Alas, you would be wrong.

It’s been a pretty hectic month. Between attending the World Domination Summit and a week later wending my way up to Seattle to ride my bike back to Portland, I haven’t exactly had a lot of down time recently.

I knew that this was going to be an expensive month. For one thing, my bike needed a fair amount of upgrades to make it optimized for the long haul. (To give you an idea, I named my bike “Craigslist” due to its inauspicious beginnings.)

And distraction mixed with extra expenses never ends up well.

Flag on the play

I recommend keeping an eagle eye on your expenses throughout the month. Setting budgetary goals is a good thing, but that won’t do you any good unless you know where you are as the month progresses. Spent 80% of your fun money halfway through the month? Time to dial it back and have more free fun. Do you really have money to go out to that restaurant? A budget will tell you all of those things.

But a budget will only help if you keep track of what you are spending as you go through the month. And this is what I didn’t do very well.

I had written down my WDS and STP spending on various pieces of paper, but I hadn’t put it together with my other spending until the other day, when I found out that I had gone over budget.

Way over budget. Like $500 over budget. For me, that’s a lot.

What to do now

This will happen to you at some point, even if you are good about keeping your focus. So it’s important to figure out how to react to this situation:

• Don’t freak out. Yes, there was a cocktail of horror and embarrassment in my glass. But after I swallowed that and took a few deep breaths, I stood up and resolved to get back in the game.
• Don’t give up. There is a tendency to look at the situation and throw your arms up. Screw it! The budget is all messed up. Guess it’s time to take that trip to Tahiti! Except, it’s really not.
• Figure out what happened. For me, it was a lot of travel and a lot of goings on, which got in the way of my recording my expenses. Being away for a week is fine, but don’t wait two more to get back to it.
• Know how over you actually are. Awareness is as important to budgeting as it is the money saving. So if you went over budget, know exactly by how much. Redo your numbers to show spending that much more than you made. Don’t write the month off. Keep going.

For the next match

There are a few things you can do that making going over budget less of a problem:

• Have float in your account. Single most important thing you can do is this. If you have enough extra money in your account, then you’re not going to hit bottom and deal with overage fees or other woes. Plus, if you have then money then, well, you have the money. This will keep you from using credit cards to pay for things. Which reminds me:
• Don’t put your spending on credit cards. I don’t want to have the debate about whether or not your should cut up your credit cards. But if you have them, don’t put your spending on them, even if you pay them off at the end of the month. (Yes, even me, a professed travel hacker, is eschewing putting spending on credit cards.) Putting money on a credit card is not actually spending that money. You’re just time-shifting it. Your checking account won’t reflect the money that you’ve already “spent,” which could potentially lead to you making poor decisions.
• Have an emergency fund. I like to say that your float is your “emergency fund’s emergency fund.” But if you spend some of your float, you will want to build that back up again. Transferring money from your emergency fund is a good way to do this. Assuming you have an emergency fund. If you don’t, I can show you how to get one.

No, I don’t know where all these sports metaphors came from

A new month starts in a few days. That’s the great thing about budgeting on a monthly basis: every month you start new, right from where you are. Like they say, at the beginning of the season, everyone is undefeated. Batter up.

But enough about me. What caused you to go over budget?

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