One of the key lessons of personal finances is that having a budget helps you be intentional with your spending so that you can reach your financial goals. But what happens when you are going through a change in your life, and you don’t know how to budget for certain things?

Whether you are switching jobs, moving to a new location, transitioning from one car to two or to none, starting school, or adding a member of your family, it can often be difficult to know how to incorporate these changes into your budget.

The temptation is just to play it by ear or to throw out the budget for a while until you get a sense of what your new expenses will be. And while there is certainly some need for flexibility, I would argue that a more mindful approach is helpful – even if you aren’t sure exactly what dollar amounts to put into certain categories.


My story


In the past two years, the issue of how to budget during a life transition has come up quite a few times for our own family. First, I moved back to the US from Korea and gave birth to my son. Then, we moved as a family back to a different part of Korea. And currently, we are waiting to hear back about a career change opportunity for my husband. We’re also planning to get a car, although we aren’t sure when.

In each of these situations, I haven’t known exactly how to budget. Before my son was born, it was impossible to anticipate exactly what would be a reasonable amount to set aside for medical expenses. I had no idea whether everything would go smoothly or whether we’d end up needing a C-section or NICU care. And for both of the international moves, it was tough to set a reasonable grocery budget, utilities budget, home repair budget, etc.

These kinds of life transitions can be disorienting, but they are a natural part of life.

So I wanted to share today some of the techniques that have helped me in managing our personal finances through these transitions.


Create one-year budget for multiple scenarios


In addition to a weekly, monthly, or by paycheck budget, I advocate also creating a spending plan for the entire year at a glance. Doing so allows you to get a fuller picture of the impact of your spending decisions on your goals.

One way to deal with financial uncertainty is to create multiple versions of the plan that depend on the different things that could happen in your life.

For example, before the birth of my son, I created three different one-year spending plans. The best-case scenario used a low estimate for labor and delivery and a high estimate for my tutoring business in the months postpartum. The worst-case scenario had us hit our family max out of pocket for my own and my son’s healthcare needs and paired it with a low estimate for my tutoring business – which would be reasonable to expect if either myself or my son faced significant health issues. A moderate scenario split the difference between these two extremes.

Building these three plans first of all gave me peace of mind because I was now dealing with something that was a little more known – even if it was hypothetical. The situation was less anxiety-inducing because the spending plans gave me a sense of how things might actually pan out.

It also allowed me to start planning ahead for that worst-case scenario so that I could mitigate at least some of its effects. I figured that even if that worst case didn’t happen, I’d rather have too much money set aside than too little.


Start sinking funds


Even if you aren’t sure exactly how much you’ll need to cover some major costs due to a life transition, start saving for those costs as soon as possible.

If you’re moving, you may want to start sinking funds for the following:

  • Moving expenses
  • Furniture and decor for your new place
  • Restocking your pantry and fridge

If you’re preparing for a new baby, you may want sinking funds for:

  • Medical expenses
  • Nursery furniture
  • Car seat, stroller, etc.
  • Childcare

Even if you aren’t sure yet how much you will need, it is helpful to start saving as early as you can. You’ll thank yourself later that you’re not starting at zero.


Build contingencies into your budget


If you know some major shift to your budget is coming up, but you don’t know quite when, it may be helpful to build various contingencies into your budget. Have a plan for what you will do with your budget once that event finally occurs.

For example, we have been planning on buying a car for a while now, but we still aren’t sure when we’ll do so. As soon as we do, we’ll need car insurance and gas money. We’ll also want to start setting aside money for car repairs.

We therefore have been including in each month’s budget a little extra for car-related expenses, just in case this happens to be the month we’ll buy a car. At the enter the month, when it turns out we still haven’t bought that car yet, that money gets funneled into our major financial goals.


Overestimate expenses but spend mindfully


If your expenses are changing, but you aren’t sure what those expenses are going to be, it’s best to plan on the high side. So if you are moving to a new area and you don’t know yet what your grocery bill or utility bills will be, set aside the upper end of what you might expect.

The best-case scenario is that you’ll have money left over at the end of the month. The worst-case scenario is that you’ll need to find some extra money in your budget, but at least it won’t be as rough as it would have been had you budgeted last in the beginning.

The real trick with this, though, is to not let these higher budget numbers give you license to overspend. If you’re moving, you may need to stock up on some pantry staples and you may find yourself eating out more than usual. But try not to let your budget be permission for lifestyle inflation. As soon as you can, try to settle into the same spending routines that you had before your move. That’s how you’ll be able to determine what a good amount for this budget category is going forward.


Underestimate income


If the unknown in your life involves a new job or a second source of income, it’s best to underestimate that in your budget at first. Until you know exactly how much income you can consistently expect, it’s again better to have money left over at the end of the month than to be short.


Have a plan for excess money


Many of these strategies for budgeting during these life transitions involve essentially the same thing: budgeting on the low side for your income and on the high side for your expenses. The natural result is that you will likely have excess money at the end of the month.

Have a plan for that money, so it doesn’t just get spent on whatever you feel like at the time.

  • Will you put it to debt or your retirement?
  • Will it go towards one of your financial goals?
  • Or will you carry that money forward into the next month as an extra buffer?


Final thoughts


One of my main philosophies about personal finance is that we make the most progress when we are intentional about the money we earn and spend. I recognize that it can be difficult to be intentional when we aren’t sure what life will throw at us.

But even if we can’t put exact numbers into a spreadsheet, we don’t have to go through these periods of transition without any plan at all.

With flexibility, conservative estimates, and a focus on our goals and values, we can still be intentional about our finances during these times.


This post may contain an affiliate link or a referral link. For more information, please see my disclosure here.

This article is for informational purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.

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