Budget Justifications - Counting My Pennies

We’re just about at mid-year in our fiscal year at work, which means it’s time for the mid-year budget review. As a part of this review, we are looking to see where we have under or overestimated our yearly department budget, and if we need to request new funds, we are required to put together a budget justification.

A budget justification is exactly what it sounds like – it’s a brief write-up explaining how much we need and why we need it. We have to be very specific or we risk having our request denied completely or our requested amount reduced. We also write these when we put together the fiscal year budget. It’s a time consuming process as it requires us to get very detailed about our plans for the year and do a significant amount of research. That said, we know when we put together the request that we have done all we can to ensure a proper estimate.

While I don’t think that all of these elements necessarily translate to a personal budget or a family budget, I think that there are definitely good pieces. Clearly, I don’t think that anyone needs to write long papers on why they need money to pay their rent, and I think it could cause quite a bit of conflict if your require your spouse to detail exactly why he or she needs extra funds this month for a new pair of pants. I do think that looking at your budget in a bit of detail and putting some thought into what you need and why is always a good idea.

Of course, you need to pay your rent or mortgage. And you need to put money into savings and you need to pay your bills and you probably also need to pay down your debt. But what else do you need? Where else do you need to put your money and why? Say you do zero-based budgeting and once you’ve filled in all your categories, you somehow have $50 left over. Where should that money go? Sure, you would like it to go somewhere fun (and you should always make sure there’s room for fun in your budget), but you’ve already budgeted $50 for fun. You love shoes, so maybe it should go into your shoe fund. But again, you’ve already got money there as well. Where is the best place to put this money? And maybe the end result is that you’ve been doing great budgeting and your savings is good and your debt payment is going well, so heck, why not put it towards something fun. But maybe you’ll realize that you didn’t put quite enough money into your savings a few months back and this would be a great way to make up the difference.

Now, I’m not saying you should start justifying every single purchase. While it would save you money, I think it would drive you crazy if you have to justify every single purchase to yourself. Sometimes you just want a latte.

Megan Smith

Megan is a 40-something government employee in the Washington, DC area. She got interested in Personal Finance when she got out of college and realized that her paycheck wasn’t going to go as far as she had hoped. Since starting this blog, she has managed to buy a house and make a solid start on her retirement goals, and hopes to help others do the same. Here is her story:

In 2007, I was a gainfully employed 20-something with no debt but not a lot of knowledge about personal finance. It was a co-worker’s comment about Roth IRAs that sent me to the internet, searching for information. It was then that I realized that I really didn’t know a whole lot about personal finance and that my current financial situation was due a lot to inherent frugal tendencies, generous family members, a fear of debt, and good luck. While that was working for me, clearly I needed a better plan.

While I had no debt, I was also pretty much living paycheck to paycheck and not worrying about going over budget (I say this as if I had a real budget) because I had an emergency fund set aside to cover any overages.

Except that’s not what an emergency fund is for.

So I did a lot of research, read a lot of blogs, and decided that I needed a plan. I needed to budget. I needed to know what I was spending my money on. I needed to prepare for the future.

I decided to create a blog not only to make myself accountable to others but also to share the knowledge that I gained along the way. I’ve learned so much from my fellow bloggers, and I hope that my readers can find something useful in what I have to share as well.

Comments

Red says
July 3, 2010 at 11:25 pm
Oh, I do this all the time. I know that “sometimes you just want a latte,” but it certainly saves money to question every purchase. For instance, I’ve gone to the grocery store twice this week, and both times I really considered picking up a jug of sweet tea. I haven’t been drinking anything but water at home for weeks, but I still decided against the sweet tea. Water is “good enough,” and I usually treat myself to a sweet tea when we go out for dinner (about once a week). Bam! Instant savings of $2.29. 🙂

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