A sense of joy fills your heart when you are within your monthly budget. Then it quickly vanishes when you get hit with a major and inevitable expense.
It can be anything, like overspending, or a medical issue, or a surprise home repair that drains your bank account, or something more serious like a job loss that drastically reduces your income.
Depending on the severity of the crisis, it can be months – or even years, till you bounce back.
Unfortunately, blowing your budget is sometimes inevitable, even for the best of us. This is truer for a family person who has a home and a car to keep and maintain, kids to take care of, or any unplanned expenses.
Whatever the reason may be for blowing your budget, there are steps you can take to limit and mitigate the damage. These are:
Don’t Fret, and Assess the Situation
Start by not panicking as it can hamper your assessment abilities. Then, be honest with yourself when determining what went wrong.
For example, if it was a major medical expense that blew your budget, determine where you could have acted beforehand to stop it from advancing into a major expense, and how much and how long will it take to recover from the mental and financial shock.
Also, make a list of your upcoming inevitable expenses, and make a plan to have the necessary funds.
Related Article: 5 Financial Situations That Indicate You Need a New Budget
Stop Hesitating, and Tap Your Emergency Fund
There is no reason to hesitate in using your emergency fund in the times of crisis. After all, that’s why you created it in the first place.
Though you should never forget the principal rule of using an emergency fund – you start replenishing it right after you use it. If you overspent and it saved you, you need to start putting money back into it the following month.
Make it a habit of putting in a fixed amount out of your monthly income in your emergency fund. As long as you do it, you’ll always have that financial cushion when you need it.
Be Real, and Cut Your Losses
Bouncing back on your monthly budget isn’t a joke. You may have to make some real changes.
Regain control of your finances and stop spending frivolously. For example, limit the number of times you eat out and make your own meals at home. Make extra so you can pack it for lunch the next day. Use public transportation, carpooling, or even walk or bike as much as you can.
No matter how serious or trivial the situation looks, the first thing you can do to get back on your budget is to stem the outflow of money.
Now Relax, and Make a Plan
Now that you have stopped the bleeding, it’s time to relax and lay out a plan to recover your losses.
Note that you may have to revamp your budget for paying off that extra debt or to replenish your emergency fund. You may also need to cut your spending for a few months or even a full year depending on the severity of your case.
The best way to avoid this kind of situation is to understand potential upcoming expenses, and have a plan to meet them.
Related Article: 4 Steps to Block Financial Holes in Your Budget