A Penny Saved is a Penny Earned

The first couple months of budgeting, I absolutely failed.  I would always go over budget in multiple budget categories.  Many times, I would only go over a budget category by a few dollars.  I would be at a store, knowing I had $xx left in my budget category.  An item I wanted would be $xx, so I bought it.  With tax, I would go over budget though.  At the time, I thought that this was not a big deal.  But it started happening in every budget category, every month.  And it started to add up.  I was living outside my means.  I realized it is important to remember that your budget is the absolute most you can spend that month.  You should pretty much NEVER go over your budget.  If you do go over budget, you are living outside your means.  So obviously, the goal is to be under budget in as many categories as possible as many months as possible.  But what do you do with the extra money each month?


When I first started spending under budget in multiple budget categories, I reallocated money from budget categories where I was under budget to other budget categories where I was over budget.  After doing this for a few months, my budget reached an equilibrium.  I had reached a budget allocation that worked for me.

Once I had a budget that worked for me, it was time to start focusing on spending less in each of these categories.  Doing things like using coupons and cutting down on purchases that were 'wants' rather than 'needs' helped me save money.  With this money I was saving each month, I could contribute more towards an emergency fund and more towards my student loan.

Now I am at a point where I feel comfortable with my budget, savings, and debt payment.  I continue to have a bit of extra money in each budget category each month.  What do I do with this money?  Who wouldn't want to reach their savings goals sooner?  Or pay off their debt sooner?  But how do you decide which one, if either?  I am trying to decide if I should save more, pay off more student loan debt, or just let this extra money in each category roll over each month.  For now, I am going to let the extra money in each category roll over from month to month.  I think it will be nice to have a bit of a buffer in each category for bigger purchases.  For example, I need to buy a new winter jacket soon, but that purchase will cost more than my monthly budget for clothing.  It will take several months of saving in that budget category for me to afford that jacket.

How much of a buffer do you allow yourself in each budget category?  When do you decide that you can start using some money from a budget category for savings or debt repayment?  Do you use that extra money for anything else?