4 sure signs your budgeting approach needs to change

Frustrated about seeing your savings plans fall short of your expectations every year? Well, the devil may lie in the details. Successive failed plans are a clear sign that your current budgeting strategy is not in sync with your reality.

Don't worry though; all it takes is a few smart changes to get your plan back on the right track. Intrigued? Read on.

Here are 4 signs your financial planning needs to change.

Your targets seem unattainable

One of the common mistakes most of us make while setting a financial plan is fixing an unrealistic goal.

While it's great to dream big, realism is a key factor to any successful financial plan, so when you make a budget strategy next time around, make sure you take into consideration your earning capacity as well as your lifestyle.

Both these are essential factors to help you determine realistic savings goals.

Your earnings have increased but your savings haven't

This is a tell-tale sign that your budgeting plan is outdated. If you're earning more than you used to at the beginning of your financial plan, you need to make sure you update your savings goals.

Why? Because whatever you're earning above your previous pay will go unaccounted for. In other words, if your salary has increased over time but your savings haven't, your financial plan is not working in your favour.

This can be easily overcome if you consciously update your financial plan as and when a financial aspect of your life experiences a change; in this instance, it's your income.

You're reaching into your investments for cash

In times of uncertainty, it is understandable for anyone to withdraw investments and utilise cash earned from it. However, this shouldn't be your go-to solution in a normal situation.

Not only will this hamper your wealth creation ability, it will also instill an unhealthy habit in the long run. Investments reward you in the long run, but only if they remain undisturbed.

If you're reaching out to them for every other cash requirement, chances are your financial plan is not working out. Revisit it; better your savings and expenditure habits - this way your investments will not be disturbed.

You're unable to determine where your money's going

This situation typically arises when your lifestyle has slightly changed since the time you penned down your action plan. For instance, let's say you switched jobs a month into charting out your action plan. Your new workplace is about 5kms farther from your home than your previous one.

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What's more? Petrol rates have increased and you pay more for food in your new office canteen. While all these may seem like trivial things to note down, they do make a difference in the big picture.

This is why your financial plan needs to evolve as you do. Expenses are not going to be constant all your life, so you need to maintain a flexible budgeting plan at all times.

If you regularly find yourself wondering where most of your money went this month, it's because of two things - a) Your entertainment choices have changed and are more expensive than before, or b) you haven't factored in some changes that took place around you.

This article was first published in BankBazaar.sg.