So it's the end of the month and you planned $500 for your groceries budget this month - but only spent $475! Maybe you found some great sales or clipped coupons. Now you are wondering, "What do I do with the leftover?"
Everyone who has ever done a budget has found themselves in this situation. Your planned amounts don't always equal what you spent. Here's how we suggest you handle these situations.
The best thing to do is look to the Baby Steps. All leftover money should be reallocated to whichever Baby Step you're on. If you're on Baby Step #1, then you would save the leftover $25 towards your $1,000 Starter Emergency Fund goal. If you're on Baby Step #2, then you would apply it as an extra payment toward the debt that has the lowest balance.
If you're on Baby Step #3, then you add the $25 leftover to your savings goal for your fully funded Emergency Fund. And so on, right down the Baby Steps. So there really shouldn’t be any “leftover” money at the end of the month. Every dollar needs to be accounted for in the budget. Adjust the Planned amount for groceries down to what you actually spent. Then take that extra money and increase the Planned amount somewhere else. You want your budget to balance.
When you give every dollar a name, you are in control of your money. If you're able to spend less than you planned on a given Budget Item, that's a great opportunity to save, eliminate debt, or be a generous giver, depending on where you are on the Baby Steps.
Now we know what you're thinking ... sometimes you've budgeted for an upcoming expense and need to carry that balance forward to next month. Maybe you're saving for a vacation, or pay a bill twice a year, or are planning for Christmas (hint: it comes in December this year). We handle these situations a little differently. Those are "Funds" and, yes, they would carry over to the next month.