A rolling budget is when the category amounts rollover from month to month. This means you can start out with a negative balance in a category from the previous month or that you can build up extra money in categories to cover expenses that fluctuate from month to month. As with most budgeting systems a rolling budget has both positive and negative aspects.
Allows You to Even Out Expenses
Video of the Day
A rolling budget allows you to even out the expenses over the year. For example your electric bill may be higher in the summer due to air conditioning. You can take the average amount you pay during the year and budget that each month. On the months the power bill is lower you leave the extra money to accumulate for the more expensive months. This allows you to prepare for the big expenses easily. It also allows you to take advantage of sales on things like clothes or other items that go on sale once a year.
Video of the Day
You Do Not Start Over Each Month
A rolling budget means that the mistakes you made last month will affect your expenses the next month. While this does stop you from building up excess credit card debt, it can be frustrating if you have a bad month or an emergency comes up which puts you behind in specific categories. There are months you may wish to wipe the slate clean and start over. However, a rolling budget does not allow that to happen. It may mean struggling to play catch up for several months.
Prevents You From Going Into Debt
A rolling budget does not leave you room to go into debt each month, because you have assigned the dollar amounts out, the money you make the next month will cover any categories that you overspent on. This means you should not be building balances on your credit cards. Your negative spending cannot be erased with a credit card since the amounts roll forward.
Savings and Emergency Planning Built In
A rolling budget allows you to build your savings and emergency funds easily. The amounts will continue to build and be listed as part of your budget, where you can easily see the amounts available to you. It is easier to transfer the money to cover the emergency and then continue building your emergency fund in a rolling budget since all of the categories are displayed in the same way.