I am not someone who deals with a budget well. I simply try to not overspend, but every budget I have had, I have broken, or abandoned. Everyone needs to understand their limitations, and I know mine.
I was reading an article (on Life Pro Tips on reddit) which said after you set up your budget, you should revisit it every six months. On the face, this sounds like a good idea, and if you have discipline it should work. My opinion is that this kind of tinkering, could easily lead to lifestyle creep.
For those that have not read my thesis of lifestyle creep, let me sum up. As your income increases, lifestyle creep, is when your lifestyle over steps that income inflation. Instead of saving more, many folks simply spend more, and that is bad.
How can adjusting your budget every 6 months lead to lifestyle creep? Simple, that is the definition of lifestyle creep. Think of the following rationalizations you might have doing this tweaking.
- You notice, normally, you never have enough cash, two days before you get paid. You just got a 5% raise, you decide to not increase your saving, so you have enough money those last 2 days. This is the prototype for lifestyle creep.You should increase your savings level by 5%, and figure out how to spend less. Don’t treat the symptoms, cure the illness.
- Your income has increased by $350 a month, and that is precisely how much you need to buy a car (on a 7 year term). This equates to adding a $4200 a year anchor to your life. This tweak could cause other ripples in your budget tweaking, which will sink you financially.
- Thanks to a bonus, you now have a 5% down payment, and at current interest rates you can afford to make the monthly payments on a mortgage. If you can’t tell all the things missing from this, you need to get help.
If you have intestinal fortitude, and can keep from rationalizing spending too much, then this idea might be a great idea. For others like me it is a cautionary tale. There are still others like Michael James who just don’t really need a budget, and good for them!