Work out whether a category went over because of a one-off, a wrong estimate or a habit.
When several budget categories run over in the same month, the usual response is a promise to try harder on all of them next month. That promise tends to fix none of them, because each category went over for its own reason, and each reason calls for a different fix.
A category usually ends up over plan for one of three reasons: a one-off, a wrong estimate or a habit. Working out which of the three you are dealing with takes most of the effort, and once you have named the cause, the fix follows from it.
A one-off is a cost that landed this month and won't come back next month, such as hosting a birthday dinner, a gift for a colleague who is leaving, or a repair you only need once.
A wrong estimate is a planned figure that was set too low. The spending is real and it recurs, and you are spending as you intended, but your guess was off or prices have gone up since you made it.
A habit is a case where the planned figure was fine but your behaviour didn't shift the way you intended. You might plan on ordering delivery twice a week and find you are still ordering four times a week.
The last two are the easiest to confuse. The question that separates them is whether you bought more than you meant to, or whether the things you meant to buy cost more than you expected. If you bought more, you are looking at a habit, and if you paid more for the same things, you are looking at a wrong estimate.
A single month can point you the wrong way, since a jump could be a one-off or the first sign of a pattern. At each close, pick out every category that went over, and before you touch the plan, set the last three months of actual spending for each one beside the planned figure.
Wei Ling is three months into her budget, and three categories are causing trouble. Eating out came in at S$560 in May (her figures are made-up examples) against a plan of S$420, which put it S$140 over. Groceries and delivery have gone over in every month so far. Her first impulse is to promise herself she'll do better on all three in June, which would leave every one of the problems in place, so she sets March, April and May side by side with the plan instead.
Eating out was S$395 in March and S$410 in April, under the S$420 plan both times. The May jump came from her own birthday dinner for six friends, which cost S$170. Without that dinner, May drops to S$390 (S$560 minus S$170), under plan like the two months before it.
Groceries, planned at S$260, came in at S$300, S$310 and S$295, roughly S$40 over each month and averaging about S$300. She asks herself whether she has been buying more than she meant to and finds she hasn't. She has been buying the same things, and they cost more than she guessed when she set the budget, so she classes groceries as a wrong estimate.
Delivery, planned at S$100, came in at S$140, S$150 and S$165, over every month and rising, which marks it as a habit. Looking through the orders, she sees nearly all of them were placed on weeknights after 9pm, at the end of long days at work.
A one-off needs no change to the plan. Adjusting the budget for a cost that won't recur leaves extra room in it, and that room ends up spent on something else. Do write the one-off down, and take a second look at it, because many apparent one-offs are yearly costs that never made it onto your irregular costs calendar, and those belong in sinking funds.
Wei Ling leaves eating out at S$420. Then it occurs to her that her birthday falls in May every year, which makes the dinner a yearly cost and not a true one-off. At her next close she'll add it to her sinking funds (lesson 3.4), so the money for next May's dinner is set aside before the month arrives.
A wrong estimate needs the category raised to what it really costs, with the same amount cut from another category so the budget still balances. Leaving the low figure in place means failing the same line month after month, until you stop trusting the budget altogether. Wei Ling moves groceries from S$260 to S$300 and covers the extra S$40 by cutting shopping from S$200 to S$160.
A habit needs the planned figure left where it is. Work out when or why the spending happens, and then add friction or make a cut. Raising the figure would make the overspend vanish on paper while quietly dropping the behaviour change you had decided was worth making.
Wei Ling is tempted to lift delivery to S$150 but decides against it, since that would undo the change she committed to in module 4. She moves the delivery apps off her home screen, removes her saved card from one of them (an idea from lesson 4.3, "Small habits that slow impulse spending"), and starts batch cooking on Sundays so there is food waiting on late nights, and she keeps delivery at S$100 for June.
Judge each habit category again at your next close. If one is still over after two or three months of honest friction, it may have been a wrong estimate all along. Decide that at a close with the trend in front of you, and if it turns out to be a wrong estimate, fix it like one by raising it to what it really costs and cutting the same amount from another category. Wei Ling will judge delivery again at her next close, with June's spending added to the three months she has already lined up.
Go back to your last close and find every category that went over. For each one, set the last three months of actual spending beside the plan, decide whether the cause is a one-off, a wrong estimate or a habit, and apply the fix that matches it.
Take every category that went over last month. Next to each, write whether it was a one-off, a wrong estimate or a habit, and what you will change.
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