How To Complete A Budget Review (2024)

Reviewing our budget is a crucial step to making sure we are on track with our financial goals. Whether you are paid weekly, biweekly, or monthly, if you want to make sure you are achieving your financial goals, reviewing your budget each paycheck is a must. Here are the four simple steps I use to complete our budget review

Before you get started on reviewing your budget, it’s essential to have a budget set up in the first place. We follow a zero based budget by paycheck using this ultimate budgeting workbook.

By completing a budget review, we know if we have stuck to our budget or if we overspent. But going a step beyond that, performing a budget review will help you know how to adjust your spending for the following paycheck, and help ensure that your spending aligns with your financial goals.

Determine Your Actual Expenses

We set up our budgets with the best intentions of how we plan to spend our money. But not everything goes according to plan. Sometimes there were extra expenses we just didn’t see, other times we had spent well below what we allotted in a specific category.

To determine your actual expenses, go back through every single one of your expenses throughout the course of your pay period, and add them up by category. To learn more about the method I use, you can head over here to read more about how to track your expenses.

The biggest difference between how we use our expense tracker and the more traditional use is that I add up each category individually and color code our categories using these Stabilo Highlighters*for fast category identification.

Once you have an idea of how much you spent over the course of the period, compare it to what your budgeted amounts were. If you were over budget, look back on the expenses and determine what the cause was.

Compare Your Budgeted Amount With Your Expenses

Look back at what you budgeted for each category and how it relates to what you spent. Did you overestimate and have money left over from this category, or did you overspend and have to pull from other categories? Reflect on which way your spending went and why.

The why is the biggest part here. As I’m reevaluating expenses for the next month, I want to know if there was some weird fluke – like social distancing measures – that can explain why I only spent $68 of our fuel category and not the $300 I would normally spend in fuel costs throughout the month.

Re-Calculate Your Budget With Your Actual Expenses

Go back to the zero-based budget you set up. Even if you overspent in certain categories, don’t get discouraged.

First, it can take between 3 – 6 months before you get the budget just right.

Secondly, just because you overspent in some categories doesn’t mean that you overspent on your budget overall. Yes, sometimes this is the case. But it isn’t always the case.

Run through your paycheck budget sheet again, this time with the real numbers. How did you end up for the month? Did your spending help you towards your overall financial goals?

What If I Overspent?

Evaluate why that might have been. Some months it seems that Murphy’s Law is just hitting in full force and we’re doing all we can to stay afloat. It is perfectly fine to feel overwhelmed during this time. Take a breather, and look at your next budget as a fresh start.
If the extra expenses were things you could have budgeted for, now is the time to make note of it so that you are better prepared in the future.

Rather than taking from any savings that we have set aside for various sinking fundsand any savings goals we are trying to reach, I take the amount we overspent off the top of the next paycheck. So if we overspent one paycheck by $200, the next paycheck we get I am budgeting it with $200 less than what we actually receive to make up for that overage.

What I Underspent?

If you underspent, it’s a little simpler. That extra money can go towards any financial goals you currently have, whether it’s reaching savings goals, investing, or paying off your debt.

Re-Evaluate Your Spending With Your Budget

The final part of a budget review is to determine whether you need to adjust your categories for the following month.

Look to see if there are any changes you can make to your budget for the following month, and how those changes can help you achieve your overall financial goals.

If you find you are consistently overspending on food, try to evaluate why. I am more likely to increase my grocery spending when I’m over budget from feeding two teenaged boys versus spending more on groceries because it was a busy month and I wasn’t paying attention to what we had on hand each week and shopping from my pantry first.

If the opposite is true, and you are spending less than you budgeted, run a test month where you budget less in that particular category. Circ*mstances change, as do spending habits, and in the end, it is better for that extra money to go to your next financial priority.

Finally, check your calendar to see if there are any upcoming expenses that you need to start budgeting for now.

To See How I Perform A Budget Review

For those of you that are curious, I showed how I walk through a budget review on my YouTube Channel. You can see it here: