It would be nice to think that you could create a “set it and forget it” plan to manage your finances. And while something like that might work well for a while, it’s not sustainable in the long term. You’ll probably experience several changes in your income, expenses, and goals throughout your life. And it’s essential to make sure your financial priorities adapt to those changes.
Chances are your income will change many times throughout your career. You may start off as an intern or an entry-level professional barely making minimum wage. As you gain experience and maybe earn another degree, you might have the chance to be promoted in your current field and continue growing your career and income throughout the years.
But income doesn’t always increase over time. Maybe you lose your job unexpectedly or experience an injury that puts you out of work for a while. Perhaps you decide to change careers entirely and sacrifice some income to retrain. Maybe there’s a once-in-a-lifetime pandemic followed by a recession and record-breaking inflation that effectively reduces your income through inadequate cost-of-living adjustments.
The thing is, you can’t expect your income to stay the same throughout your life. You can’t even expect it to stay relatively the same – to keep up with inflation or automatically adapt to other changes in the economy. So you need to be flexible enough to evolve your budget to account for those changes in income.
Just like your income, your expenses can change drastically in different phases of life. Maybe your living expenses were low when you were in college, but your overall expenses were fairly high when you consider the cost of tuition or student loans. The amount that you spend on housing might significantly increase (or decrease, depending on where you live) when you switch from renting to buying a home.
The amount of money that you need to spend on essentials is comparatively low when you’re single or when you and your partner don’t have children. But having a child drastically increases your expenses, both initially and over time. Ask most parents, and they’ll agree that it’s hard to believe how minimal their expenses were before their children came along.
And that’s OK. Life has seasons. Yes, going to school and having children are expensive prospects. But even if you can’t completely prepare for them, you can adapt your budget to account for those changes when they arrive.
Goals and values change
Many people also experience several shifts in their financial goals and values as they grow older. Younger people generally prioritize travel and convenience services, but older individuals focus more on investing and saving for retirement.
Parenthood can bring on a big shift in finances. Kids are expensive – that’s just a fact. And you can’t effectively budget as a parent without allowing for all the expenses related to your children. You may be looking at years of childcare costs and college savings and wondering if you’ll ever be able to go on a fancy vacation or buy a nice car again.
But if you feel overwhelmed or discouraged about how different your finances are right now compared to your pre-child years, remember that this is a season. A child-centric budget isn’t forever – kids grow up and leave the nest. And when they do, your financial priorities can evolve again.
Children aren’t the only thing that can affect money goals. When the economy becomes unstable, you may allocate more money to your emergency fund than you did before. Or you might decide that charitable giving is more or less important to you as you age. Sometimes it can feel scary to see how much your financial priorities have shifted. It’s always OK to change your financial priorities because the most important thing to do with your money is to use it in a way that matches your values.
Allow your finances to evolve as your life changes
Life is always changing; you move up (or down) in your career, your kids grow up and move out, and you get closer to retirement.
Your finances should adapt to fit the changes in your life circumstances. It doesn’t make sense to expect the budget you had as a single career person to fit your life as the parent of young children. The best thing you can do for yourself and your family is to match your budget to the reality of life right now.
So how do you do that? What’s the best way to develop a budget that accounts for everything but is flexible enough to change when you need it to? Try our innovative BudgetingBlocks™ system. This fun, game-inspired method allows you and your partner to easily visualize your money and see what happens when you move it around and allocate it differently. Use your BudgetingBlocks™ to make changes as often as you need to.