Monthly Carryover

This is part 2 of an ongoing series of posts about how to use BudgetSimple to manage your budget. Please read part 1 first.

In our first example we ended up the month over budget. I suspect this is the most common reality of people s first month in BudgetSimple. If you are under budget, great! Put the extra money in savings, or pay down a credit card. But the trickier question is what do we do when you are over budget.

There is a hard fact to face that being over budget consistently is not sustainable. This is how most of us end up in debt because that overage has to come from somewhere. Your end goal should be that these overages are rare, and when they do occur they come from your savings account instead of ending up on a credit card.

When you are over budget, the first thing you need to evaluate is whether your budget goals were realistic. Sure we want to spend only $200 on our electric bill, but looking at our figures it was higher then we budgeted. Maybe you can cut back by turning off more lights, or maybe we just need to raise that figure for the next month. The way I look at your first month s budget is that it is a lesson in where most of your money goes. The next month to stay on budget will require some sort of change. Looking at our example budget from last month:

Category Budgeted Actual
Rent 500 500
Insurance 100 100
Car Payment 250 250
Karate Lessons 50 50
Electric 200 232.76
Heating 100 110
Gas 150 178.89
Groceries 250 276.34
Entertainment 100 112
Car Maintenance 50 29
Pet Food 50 45
Eating Out 200 290
Clothing 50 76
Savings 50 0
Total 2000 2249.99

Getting things like the electric bill lower are much more difficult problems to solve then getting our eating out items lower. When you start a new month in BudgetSimple, you will be given the option to carry over your surplus or deficit from the month before. If we were to carry over our deficit of $249.99 from the previous month, that means you ll have $249.99 less to budget with this month (and you thought it was hard to make your budget last month!). I recommend using this carryover function when at all possible. If you want to take a mulligan for this first month and start again without that deficit, you can definitely do that too.

My recommendations for this example budget are cutting down on the discretionary expenses first. Eating out and Entertainment are obviously optional things. Of course reducing your Eating Out bill will most likely increase your grocery budget (which we also exceeded), so be sure to adjust that accordingly. I m sure you ve tried this type of thing before. You eat Ramen for a month and sit home instead of going out. This isn t very sustainable either. Try to find a realistic balance where you can still have some fun. For example, instead of buying magazines at the store, get a subscription. Usually a subscription costs the equivalent of only 3 issues.

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HOW IT WORKS