I talk about my spending plans and my savings goals but rarely talk about breaking the budget. Most times, my spending plan keeps me on track to ensure I spend less than I earn. However, there are also times I just do not keep within the spending limits of my category allocations. How do I handle this situation?
Minimize the excess spending.
This is always the best strategy even if it may not be the most realistic. I estimate I overspend ~5% of the time so this reduces the chances of spending too much. I also try not to go more than a few dollars over the spending plan allocation. Again, this can be a challenge but I try to reduce the chances I need to steal from my savings account to fund my overspending.
Keep the overspending in the same month's budget.
This is where I start playing with several categories allocation. For example, if I exceed the limits of my personal care category, I see if there is any money I can use in miscellaneous or even entertainment. Yes, I do stretch some definitions but I am trying not to use my savings. If overspending occurs at the end of the month, there may not be enough left in other categories to fund my shameful excess.
Use the next month's allocation if the same month cannot fund the excess spending.
Yes, I do spend into the next month if I see no other way around my overindulgence. In May, I did exceed my grocery limit and could no longer use money in my eating out allocation. Therefore, I subtracted the amount from my June grocery allocation. I do not recommend this because the overspending can carry over too far. If the category is exceeded in the next month, I suggest either taking the money from savings before compromising another month's spending, or rethink the amount allocated in a particular spending category especially if this category tends to run over more than twice a year.
Raid the savings account.
This is the last resort because the reason for the spending plan is to keep my spending in check. However, I sometimes have to admit defeat and just steal from my savings account. This is not ideal since overspending does not constitute an emergency. As long as this happens two times or fewer in a year and does not exceed $100, I forgive myself the excess. More than that, I start to take a closer look at why I exceeding my spending caps and what do I need to do differently.
Any thoughts on overspending and how to handle it within a spending plan?