Adjusting your Lifestyle or Adjusting your Budget?

When something dramatic changes in your life, how do you respond? do you change your lifestyle around it or do you change your budget instead?
For example, given the sharp increase in the price of gas in the last few weeks, do you go back to your budget and increase the amount allocated for gas? or do you keep your budget the same and instead adjust your driving, by driving less for example? how about an extreme change in weather, say to much hotter or colder? do you make adjustments at home or do you change your budget to give more allowances for heat/AC bills?

These are questions you will likely face with a personal budget, and answering them will require some analysis and number crunching.

-Is the change permanent, short term or unknown? if it is a short-term change that won’t last for long, then you can go through it and do your best to adjust to it. In fact, if you are prepared financially, you may not even need to make any changes. If the change is permanent, then you will have to sit down and do some analysis in terms of what needs to change, your budget or your whole lifestyle.

-Which one will give you a better value and utility? it is not just about the money but the value and return you get (health, life, family etc.) In other words, changes to your budget may be the way to go if it will make your life better. Example would be in buying a car. When making the decision as to which car to buy, you may come across a car that will cost a little more and even more gas than what you currently have. But this car will give you and the family more value, safety and comfort overall, so it is worth adjusting your budget for it, for a better lifestyle.

-How easy is it to make changes to your lifestyle? if it is easier to make a budget change and almost impossible to change the way you go about your life to accommodate the new changes, then go for the former. If your company is experiencing a slow season and your hours are reduced as a result, you may not want to look for another PT job due to family commitments. In a scenario like this, you would find it hard to make changes to your lifestyle, so instead, you make changes to your budget by saving less money for example.

Can you make small changes to both? in certain situations, it may be easier to make small changes to both your lifestyle and budget, rather than a big change to one of the two.  This way, you may feel a smaller hit. Example would be the introduction of a new member to a family through birth. With a new baby in the family, you will have added expenses and time commitments, not to mention all the time and energy needed. You can’t respond to such a dramatic change to the nucleus of your family by simply modifying your budget only. You will have to do more changes to your lifestyle as well. You may need to stay home more often to take care of the baby. Of course, the alternative would be to hire a nanny and pay her well over $1,200 a month, which would probably obliterate your budget. But by making small changes to both your lifestyle and budget together, you get to feel a smaller sacrifice from this huge change to your life.


The point is that you will need to apply different changes depending on the situation. Once size doesn’t fit all. And as we already seen with some examples, you don’t always have to go with one and not the other, but can in fact incorporate small changes from both.  You should hardly ever resort to making dramatic changes to one and not touching the other. If it is a huge change, it is best to split the responsibility between both your budget and your lifestyle.

Just remember, one of the last things you should touch when adjusting your budget is your savings. It is easy to look at your savings and think it is the easiest thing to sacrifice but it doesn’t have to be. With careful planning and reassessment, you may realize that making small changes to your lifestyle may spare your savings from being reduced or even eliminated from your budget.