From Plan to Progress: Navigating Budget Reconciliation for Financial Freedom

It’s one thing to create a budget, or ‘plan,’ for your money. It’s a whole other thing to follow it – which really is the whole purpose of that initial budget reconciliation plan anyway. Let’s talk through how to keep up with your budget on a regular basis – and therefore stick to your money goals on your way to financial freedom.

Do I have to?

If you don’t learn how to ‘reconcile’ your budget – you will struggle to make significant progress toward the goals that you set for yourself. I’m here to speak truth to you, not blow any smoke – but I promise it’s much less painful than poking your eyes with needles or dealing with the dentist sans funny gas.

And if you’re second-guessing if you need a cash flow plan, spending plan, or budget (they all mean the same thing – just your word of choice) I’d say that MOST of us do. If we don’t tell our money what to do, it will inevitably just send us a little FYI later on about where it went without a whole lot of purpose or intention. Need to start at the beginning? That’s okay! Read up here about how to start a budget.

What does it mean to reconcile your budget?

Okay, you’re on board with creating a plan for your money – now what? Budget reconciliation involves comparing your actual income and expenses with the budget you’ve set, identifying any discrepancies or oopsy daisies, and making adjustments as needed.

budget reconciliation photo

Here are some best practices for effectively reconciling your personal budget:

Track All Transactions:

Keep track of every financial transaction, whether it’s income or expenses. This includes regular bills, discretionary spending, savings, and even small cash transactions. Use tools like budgeting apps, spreadsheets, or pen-and-paper methods to record these transactions. Essentially, you’re just keeping tabs on everything that came in, and everything that went out.

Regular Review:

Set a specific time for budget reconciliation. This could be weekly, bi-weekly, or monthly. Consistency is key to staying on top of your finances and catching any issues early. I’m a big fan of doing this weekly at least to start; a whole pile of 30 days worth of transactions can quickly get overwhelming – a 7-day window is much easier to manage.

Compare Actual vs. Budgeted:
  • Compare your actual income and expenses against the budget you’ve created. Use categories and subcategories to break down your expenses. This comparison helps you identify areas where you’ve overspent or underspent. No need to beat yourself up here, you’re just seeing how good of a guesser/projector you really are – and you’ll learn to make adjustments as you move forward. Give yourself grace.
Use Technology:
  • Consider using budgeting apps or software that can automatically import and categorize your transactions. This can save you time and reduce the risk of manual errors.
Check for Discrepancies:
  • Look for any discrepancies between your actual spending and what you budgeted for. If you notice any unexpected expenses or income, investigate the reasons behind them. Did you forget to cancel the Disney+ again? Did the Chinese restaurant accidentally charge you double for your extra order of egg rolls?

By incorporating regular budget reconciliation practices, you can gain control over your finances and progress steadily toward your ultimate goal of financial freedom.

Adjust as Necessary:
  • If you consistently overspend in certain categories, it might be an indication that your initial budget was unrealistic. Adjust your budget to reflect your actual spending patterns, and consider finding ways to cut back in areas where you’re spending more than you’d like. 
Build in Buffer Categories:
  • Include categories for unexpected expenses, such as emergency fund contributions or miscellaneous expenses. This can prevent budget shortfalls when unexpected costs arise. One of my personal favorites is an annual savings accounts that covers intermittent expenses like DMV renewals, auto insurance premiums, and holidays. 
Review Financial Goals:
  • Reconciling your budget is a great time to review your financial goals. Are you making progress? Do you need to adjust your goals based on your current financial situation? Is your goal juicy enough to motivate you? Do you have a good enough why behind it?
Celebrate Successes:
  • Acknowledge and celebrate when you stick to your budget and achieve your financial goals. This positive reinforcement can motivate you to continue managing your finances effectively. There’s a reason I have an entire step in the framework I use around celebrating and thriving – we need that pause, reflection and deep sigh before moving to the next.
Plan Ahead:
  • Use your budget reconciliation sessions as an opportunity to plan for the upcoming period. Anticipate any large expenses or changes in income and adjust your budget accordingly. No two budget months should be the same. I’m serious. You have other things that come up. Sure, you can have a good core – but some months have five weeks, and therefore more income, or more gas expense. Some months have more birthdays or festivities. 
Communicate with Others:
  • If you’re part of a household, ensure that all members are on the same page regarding the budget. Regularly communicate about financial decisions and ensure that everyone is aligned with the budgeting goals. If you have kids, bring them into the discussion – we have $xxx for restaurants this month; what’s your vote on where we go? If you’re married your partner needs to have some say-so in this, even if you are the blog reader/button pusher/bill payer. 

Real Life Examples

What does this look like in reality? Here are a few answers from my clients.

How often do you reconcile your budget?

“Once a month (true confessions)”
“At least twice a week”
“Weekly “
“Once or twice a week”
“Try to every week. Most often turns out to be every other week”
“Twice a month “

How long does it typically take you?

10 – 30 minutes was the average answer, such a quick drop in the bucket of time – and critical to staying on target, check out this next question.

How important is reconciling your budget to staying on track with your plan?

⅔ of clients surveyed gave it a 10/10 with a handful of 9’s and an 8 in there.

Do you have any traditions that you do before, during or after? I.e. with coffee or while watching Suits

“Budgets and brews” we reconcile our budget then go out for a drink. Not what we do every time, but our favorite way to do it! Makes it feel like a date, not just a chore.”
“Everything is done with coffee and background music (to calm me).”
“Anytime we do a project, we often times have sex first… it alleviates A LOT of tension & we work much better together & communicate better.”

LOVE these traditions from soft background music to a fun name like budget and brews, to a romp in the hay beforehand – whatever traditions work best to stay on track!

Other Comments

“Gets more streamlined the longer you do it, and easier.”

Preach it! I couldn’t agree more – just gotta get started…

Get Started

It’s not enough to make a plan, you have to hold yourself TO the plan, and measure your progress – and the best way to do that is to weigh yourself weekly. I mean, reconcile your budget weekly. Yes, I have other goals happening right now too. Financial freedom is within reach, I absolutely believe it – with a plan and a purpose. Get to it!

Sarah is a Ramsey Preferred Coach
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