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.