Over the last few months I’ve been showing you my budget updates and exactly what my budget is doing. However there’s one aspect that I haven’t shared with you and that is exactly how I review my budget each week.
I really feel how I review my budget each week is actually the secret sauce per say to making my finances a success. When it comes down to it, it helps me make better financial decisions on a weekly basis rather than just off the cuff,it helps identify problem areas for me in my budget, and most of all it helps me determine how I’m doing at any given point and time of the month.
So in this article I’m going to give you an inside look into how I review my budget on a weekly basis.
Step 1: Review The Weeks Transactions
The first thing I do is open up Mint.com the online tool I use to manage my budget. Now you can use whatever budgeting software or spreadsheet you like but before I do anything I want to see exactly what transactions all came through in the weeks time, and what’s great about Mint is that they all come up in place for me so I don’t have to flip between multiple spreadsheets or ledgers to see exactly what I spent money on. Below is a sample of a few transactions I have to get you a feel for what I’m looking at. I also like to look at things from overall standpoint just to see what has changed over the last week and to identify any issues or problems that might have come up since my last budget review.
Step 2: Categorize
From here I will skim through my transactions and categorize any new ones that came in over the last week. Of all the steps this is probably the most important of all of them because all this information will transfer to my budget and tell me just how well I’m actually doing. Categorizing in Mint is also easy to do since all you have to do is click the proper category in the transaction you select and click on the right subcategory. Below is a picture of what I’m talking about.
I also find that being very granular with my budget is very important as well. For example, I could just lump dentist bills in with doctor bills but what I’ve found is when I split things up and get more specific with my budget I can learn more things about how much I’m spending and where.
A good example of this for me is that I recently added the pharmacy to my budget because I noticed over the last few months that my wife and I have been buying stuff from the pharmacy which hasn’t been a lot but what’s great about this is that Mint lets me know how much on average I’m spending in a particular area by analyzing the data over time.
Once all of the latest transactions have been categorized I can move into the final step to review my budget and make any necessary changes.
Step 3: Review & Make Changes
In the third and final step of this process it’s time to review my budget, see exactly what my cash position is for the month, and make any necessary adjustments to my budget.
To start the first thing I like to do is look at my budget and see where I’m doing good and where I’m not doing so good. Below is a sample of what my budget looks like. The green shows that I’m doing great with that particular budget, the yellow means I’m getting close to going over, and the red shows where I’ve exceeded my budget.
Once I’ve reviewed my budget my next step is to see what my current cash position is. To do that all you have to do is minus your projected income from your expenses and this will tell you exactly how much cash you have left for the month.
For example, in last months budget after I deducted all my expenses from my total income I ended up with an extra $209. Now that might not sound like much but that number not only tell me that I’m in the green for the month but that I am headed in the right direction with my finances, and that’s a great feeling.
Then once I’ve figured out my current cash position I make any necessary changes if needed. This could be adding any new budgets, taking old ones down that I don’t use anymore, or even adjusting my spending goals on my budgets.
As a final thought I should mention this entire process only takes me 20 to 30 minutes to do, and as I mentioned in my last article I do that because I’ve come to the realization that I don’t have all kinds of time to work on my budget.
Now don’t get me wrong their are some weeks were I will spend a couple of hours looking at my budget but for the most part it only takes me around a half hour and I’m done.
So how long does it take to review your budget each week?