You will be able to reset your budget after a month that went badly instead of abandoning it.
Put last month's spending beside your plan and write down the total gap in dollars. If you went over, that's the amount the reset below has to cover. If you came in under, use the same steps to plan for a month that goes wrong later.
Most people who drop a budget do it after a single bad month, and the method they were using usually had nothing wrong with it. You can pay back an overspend over a few months. Quitting the budget costs you far more, so quitting is the thing to guard against.
People who study dieting call this pattern the what-the-hell effect. You break a rule, decide you have already failed, and stop trying for the rest of the day or month. Money works the same way. One blown month turns into a belief that budgeting doesn't work for you, and the month after goes unplanned as well.
Every budget has bad months. A wedding season, a family emergency, a sale you could not resist, or a month when life was just expensive can each cause one. A plan that only holds in good months isn't much use to you. Expect bad months, and keep a reset rule ready: a set plan where you cover the overspend, find the cause and make one change, and then start the next month on plan.
Farhan is the course's second example person, and he works at a showroom. His figures are made up for the example. He had kept to his budget for four good months before September. Then a friend got married in Kuala Lumpur, so he paid for the bus, two nights in a hotel and a gift. He also bought things in a 9.9 sale (the September 9 shopping sale) that he had meant to skip. It was a busy month at the showroom, and he had a string of late dinners. At his monthly close he was S$640 over plan. His first reaction was that the budget had failed and he might as well stop pretending.
You can cover an overspend from two places. The first is your buffer, money you keep partly for this purpose. Using it for an overspend is part of its job and doesn't count as a failure. The second is next month's wants, which you cut on purpose so that the month is lighter. You can use either one or both.
Farhan used both. He took S$400 from his buffer. He planned S$240 less in wants for October, made up of S$140 less on food outside home and S$100 less on shopping (S$140 + S$100 = S$240). Together, S$400 + S$240 = S$640, which covers the whole overspend. He paid his card bill in full on the due date, as he always does.
Do the same with your own card. If you leave an overspend on a credit card you can't clear in full, you pay interest charges and take on a debt payment that squeezes every month after it. That makes your next bad month more likely.
Put the buffer back slowly, paying in a fixed amount each month until it is replaced. Farhan chose S$100 a month for four months and paid for it with a smaller shopping figure. S$100 x 4 months = S$400, so by January his buffer was back where it was.
Before you move on, write down what caused the overspend and one change that would make it less likely next time. You only need to ask one question: what would have made this month go differently?
Farhan started with the wedding. The invitation had come in June, so he knew about it months ahead, but he never planned for it. He added weddings and trips to his irregular costs calendar from lesson 3.4, "Build your irregular costs calendar", where expected events like this one get planned for. He put the sale down to habit, so he turned off notifications in the two shopping apps he uses most, which is the fix from lesson 4.3. He didn't try to fix everything else about September, because one clear change is far more likely to stick than five vague ones.
Start the next month on plan, with only the trim you planned. Don't try to close the whole gap at once. After a bad month, the usual temptation is an extreme month with no eating out, no shopping and nothing else, so you win back the full amount in four weeks. That rarely works. The month is miserable, and a miserable month often ends in another overspend, which starts the cycle again.
Farhan's October was a normal month with S$240 less in wants. He noticed the cut, but it was bearable. By January his buffer was back where it was and the budget was still running. The month he thought had ended his budget became one row on a sheet that keeps going.
The best time to decide how you will handle a bad month is before you have one. Think about where an overspend would come from in your budget, how fast you could rebuild it, and the one question you would ask about the cause.
Write your reset rule: where an overspend will come from, how quickly you will rebuild, and the one question you will ask about what caused it.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).