What To Do When You Blow Your Budget

Hint: Don't Panic!

Raise your hand if this sounds familiar: You wake up bleary-eyed on a Monday morning after a weekend of online shopping (hello, new ankle boots!) and pizza delivery. You log in to your bank account only to discover that your balance is at a frightening -$5. You eat a leftover slice of pizza for breakfast and try not to freak out.

If your fingers are reaching to the sky right now, know that you’re not alone—and certainly not the first person to ever blow their budget. What you need now is a plan to get back on track. You can bounce back from a blown budget!

We've teamed up with Charles Schwab, Schwab Moneywise, and their resident personal financial expert Carrie Schwab-Pomerantz CFP® for a sound, totally accessible break down of how to get your financial ducks back in a row. All you have to do is put down that slice of pizza, read Schwab-Pomerantz's "Ask Carrie" column, and follow this step-by-step guide:

1. First Things First: Don’t Panic

Yeah, that may sound easier said than done. After all, money and emotions are kind of like peanut butter and jelly — they often go hand-in-hand and can create a bit of a sticky situation. (To wit: a Charles Schwab survey found that FOMO from social media causes enough negative emotion to influence spending habits) But, says personal financial guru Carrie Schwab-Pomerantz, it’s important to make money decisions with a clear and level head. “Studies have shown that anxiety has an adverse effect on almost all our financial decisions,” she explains. “Stress can make us spend more, save less, and rack up credit card debt.” So before you do anything else, take a few deep breaths and tell yourself, “You’ve got this!”

2. Reassess Your Budget — Or create one if you haven’t already

Next, dig into that dollar deficit and find its source. Scour your budget to identify where you overspent this month. Did those ankle boots go above and beyond your $50 monthly clothing allowance? Did that pizza send your food category into the red? Isolate the issue and then fix it. This might mean devising a trade-off, like moving some funds from your fun times category into your food category so you can buy groceries for the rest of the month.

Now, if all of this budget talk has you scratching your head thinking, “Hmmm, maybe I should get one of those,” yes, you most certainly should! A budget is the most reliable way to track what you have coming in and going out each month.

“Take a look at what you need vs. what you want,” says Schwab-Pomerantz. “Start by adding up essentials like rent, transportation, groceries, utilities, student loan payments, car payments, etc. Don't forget savings! And don't just guess—write them down or use an online budgeting tool. Now subtract this amount from your take-home pay. What you have left is what you can direct toward things you want.” By putting it down—whether on paper or a digital format—it will be much easier to see where your money goes.

Pro tip: the Schwab Moneywise 30-day financial cleanse is a great way to teach yourself great financial habits, and train yourself to stick to a budget.

3. Resolve To Spend More Mindfully

Whether you receive regular paychecks, are freelance, or are looking around for your next gig, spending is really where you can affect positive or negative change with your budget. “To me, this is the crux of it all, whatever your age or financial situation,” says Schwab-Pomerantz. “Spending mindfully means knowing where your money is going—and where you want it to go. It means setting realistic goals and working toward them. And it means being conscious of your finances, whether during lean times when you have to cut back or flush times when you can afford to treat yourself. Ultimately, it means you control your money rather than having it control you.”

4. Build A Buffer — Just In Case

Even with a reliable budget in place, you may experience something unpredictable that throws things out of whack. Whether it's an expense shock (new tires, large out-of-pocket medical bills) or an income shock (lay-off, furlough, reduced hours), an emergency fund is your friend. “Set aside a certain amount each month, no matter how small,” says Schwab-Pomerantz. “Eventually you’ll want your emergency fund to cover three-to-six months of essential expenses in case you ever become ill or unemployed. Put the money someplace easily accessible, such as in a savings account.” This way, in those rare circumstances when you just can’t balance your budget, you’ll have some money (and peace of mind) to fall back on.

5. Check in regularly

When your life changes, so too should your budget. Say you pay off your student loans — now you have a certain sum of money each month you can reallocate towards something else, like paying down a credit card faster, boosting your 401(k) contributions, or saving for a new car. Keep your budget as up-to-date as possible to not only reflect your current financial circumstances but also any new life goals. Schwab-Pomerantz suggests making a “financial date night” of it. “A little moral support can go a long way,” she says. “Set up a regular time to discuss your financial goals and realities with your spouse, partner or a trusted friend to share tips and help each other stay on track.”

And voila! Now that blown budget is just a tiny blip on your long (and fruitful) financial timeline.

This article is sponsored by Charles Schwab. Visit Ask Carrie to help you on your way to achieving your own money goals in the future. The information provided here is for general informational purposes only and is not intended to be a substitute for specific individualized tax, legal or investment planning advice. Where specific advice is necessary or appropriate, consult with a qualified tax advisor, CPA, financial planner or investment manager.