Budget Review and Adjustment

A budget isn’t set in stone. Regular review and adjustment keeps it relevant and effective.

Why Review Your Budget?

Life Changes

Your budget from 2 years ago doesn’t fit today because:

• Income changed
• Expenses changed
• Goals changed
• Circumstances changed
• You changed

What You’ll Catch

Regular reviews reveal:

• Categories consistently over/under budget
• Spending patterns you didn’t notice
• Goals that need updating
• Automation that needs fixing
• Opportunities to optimize

Review Frequency

Weekly Review (10 minutes)

When: Every Sunday

What to check:

• Week’s spending vs. plan
• Upcoming bills
• Any surprises
• Cash flow for next week

Questions:

1. Did I stay within my weekly spending?
2. Any unexpected expenses?
3. What’s coming up next week?

Monthly Review (30 minutes)

When: First weekend of month

What to analyze:

• Category totals vs. budget
• Income vs. plan
• Savings rate achieved
• Goal progress

Questions:

1. Which categories were over budget? Why?
2. Which were under budget? Can I reduce those further?
3. Did I meet my savings goal?
4. Any adjustments needed for next month?

Quarterly Review (1-2 hours)

When: Every 3 months

What to assess:

• 3-month spending trends
• Budget category accuracy
• Goal timeline review
• Investment performance
• Insurance needs
• Major upcoming expenses

Questions:

1. Are my budget categories still accurate?
2. Am I on track for yearly goals?
3. Any lifestyle creep?
4. What should I adjust?

Annual Review (3-4 hours)

When: December/January or birthday

What to overhaul:

• Complete budget restructure
• Goal setting for next year
• Net worth calculation
• Insurance review
• Career/income assessment
• Major life planning

The Monthly Review Process

Step 1: Gather Data

Pull together:

• Bank statements
• Credit card statements
• Cash spending records
• Tracking app data

Step 2: Calculate Actuals

Step 3: Analyze Variances

Over budget categories:

Under budget categories:

Step 4: Decide Adjustments

Options for over-budget categories:

1. Increase budget — if expense is necessary
2. Decrease spending — if expense can be cut
3. Reallocate — from under-budget categories
4. Accept variance — if one-time occurrence

Step 5: Update Next Month

Make concrete changes:

• “Transport budget: ₹5,000 → ₹6,500”
• “Add reminder to reduce AC usage”
• “Move ₹1,000 from food buffer to transport”

Analyzing Spending Patterns

Look for Trends

Review 3+ months to see patterns:

Questions to Ask

For increasing trends:

• Is this inflation or lifestyle creep?
• Is this a necessity or a want?
• Can I reverse this trend?

For decreasing trends:

• Did I actually need that money?
• Can I redirect savings to goals?
• Is quality of life affected?

Red Flags

Adjusting Budget Categories

When to Increase a Budget

✅ Increase when:

• Consistently over for 3+ months
• Life circumstances genuinely changed
• Necessary expense increased

When to Decrease a Budget

✅ Decrease when:

• Consistently under for 3+ months
• Found efficiencies
• Expense no longer needed

When to Add a Category

✅ Add when:

• New expense type (pet, hobby, child)
• “Misc” consistently has same items
• Better tracking needed

When to Remove a Category

✅ Remove when:

• Expense eliminated (debt paid, moved)
• Category merged with another
• No longer relevant

Life Event Adjustments

Major Events Requiring Budget Overhaul

How to Adjust

1. Don’t guess — wait 2-3 months to see actual changes
2. Track everything — especially new expense types
3. Reassess goals — priorities may have shifted
4. Build buffer — new situations have surprises
5. Review more frequently — monthly until stable

The Annual Budget Overhaul

December/January Process

Week 1: Review past year

• Total income vs. plan
• Total expenses by category
• Savings rate achieved
• Goal progress

Week 2: Assess changes

• What’s different now vs. last year?
• Expected income changes?
• Expected expense changes?
• New goals?

Week 3: Create new budget

• Set income projection
• Allocate to categories
• Set savings targets
• Define goals

Week 4: Set up systems

• Update automated transfers
• Adjust SIP amounts
• Set new alerts
• Prepare tracking

Annual Review Questions

1. Income: Will it increase? By how much? When?
2. Expenses: Any new? Any going away?
3. Goals: What do I want to achieve this year?
4. Savings: What rate am I targeting?
5. Investments: Any strategy changes?
6. Insurance: Coverage adequate?
7. Debt: Any to pay off?
8. Major expenses: Vacations? Purchases? Events?

Budget Adjustment Examples

Example 1: Salary Increase

Before (₹80,000 income):

• Savings: ₹16,000 (20%)
• Expenses: ₹64,000

After raise (₹95,000 income):

• New savings: ₹31,000 (33%) ← Increased rate!
• Expenses: ₹64,000 ← Kept same!

Rule: Increase savings by at least 50% of raise.

Example 2: New Baby

Before:

• Dining out: ₹8,000
• Entertainment: ₹5,000
• Shopping: ₹5,000
• No child category

After:

• Dining out: ₹4,000 (less time/energy)
• Entertainment: ₹2,000 (home activities)
• Shopping: ₹2,000 (priority shift)
• New: Child expenses: ₹15,000
• New: Childcare fund: ₹5,000

Example 3: Paying Off Debt

Before:

• EMI: ₹15,000
• Savings: ₹10,000

After debt payoff:

• EMI: ₹0
• Savings: ₹20,000 (doubled!)
• Investment: ₹5,000 (new)

Rule: Redirect at least 70% of freed money to savings/investments.

Common Adjustment Mistakes

Mistake 1: Adjusting Too Often

❌ Changing budget every week ✅ Give budget 2-3 months before major changes

Mistake 2: Never Adjusting

❌ Same budget for 3 years ✅ At least quarterly review, annual overhaul

Mistake 3: Adjusting Up Without Justification

❌ “I spent ₹15,000 on shopping, so I’ll budget ₹15,000” ✅ “Why did I spend ₹15,000? Do I need to?”

Mistake 4: Not Tracking Adjustments

❌ Mental notes only ✅ Document changes and reasons

Tracking Your Adjustments

Keep a Budget Change Log

Review the Log

Patterns in changes reveal:

• Which categories are hard to predict
• Life changes that affected budget
• Whether adjustments worked

Key Takeaways

• Review weekly — quick spending check
• Review monthly — category analysis
• Review quarterly — trend assessment
• Overhaul annually — complete restructure
• Adjust based on data — not emotion
• Track changes — learn from adjustments
• Life events require immediate review — don’t wait
• 50% of raises to savings — before lifestyle inflation

Next: Teaching Kids About Budgeting — Help the next generation develop money skills.