Think budgeting is all about strict rules and saying “no” all the time to the things and experiences you love? It doesn’t have to be. A flexible budget could suit your personality and lifestyle more.
When they hear the word “budget,” some people think of a strict or fixed budget, which means it’s an established budget based on income and expenses. However, a flexible budget allows for an irregular income as well as variations in expenses. But what does budget flexibility really mean? “It’s giving yourself permission to course correct and adapt as things change,” said Bobbi Rebell, CFP, author of “Launching Financial Grownups.” That means knowing when to stick to your plan and when it’s okay to rewrite it.
Pit a fixed budget and a flexible budget against each other to see which makes sense for you.
If you think a flexible budget sounds like an appealing way to reach your personal finance goals in 2025, learn ways finance pros suggest you adapt your spending throughout the year.
Budget flexibility is all about elasticity. It’s the opposite of a strict budget. “Some of the things that change are in your control, while others are clearly not,” Rebell said. “Either way, it makes sense to be flexible and not feel you need to ‘stick to the plan’ when the plan is no longer the best way forward.”
Flexible budgeting is about embracing a certain level of spontaneity rather than rejecting it as something irresponsible, said Jen Smith and Jill Sirianni, co-authors of the new book “Buy What You Love Without Going Broke.”
“Not many people realize this, but spontaneity is actually one of our higher needs and motivations,” Sirianni said. “It’s one of the reasons we’re so susceptible to impulse spending. To us, flexible budgeting means creating a budget that embraces a certain level of spontaneity and impulsivity rather than reject it as something irresponsible.”
Before you start playing around with budget categories, know how much your essentials cost you. These are the nonnegotiables you’ll need to pay each month — rent or mortgage, utilities, insurance, transportation, and minimum debt payments. Groceries should be included in this, but you might find ways to trim this category.
Make sure you have enough to cover everything in these categories each month before you start setting aside money for vacations, haircuts, etc. Having these numbers in front of you will show you how much wiggle room you have to address various budget categories with your income.
Once you have your core expenses set aside, consider your values to determine your other budget categories. “Instead of budgeting per category or store, you budget related to your values,” Smith said. So say, for instance, one of your highest values is “family,” then you’ll create space for that in your spending plan. “You’ll be able to get creative and meet more of your values without money, therefore freeing up more of your money for financial goals,” Smith said.
“We start with the recurring bills, then everything else falls within larger ‘miscellaneous’ funds defined by your values like family, friends, health, etc., that cover the rest of your discretionary spending,” Sirianni said.
Automation makes budgeting easier — particularly when it comes to paying bills on time — but don’t let your expenses run on autopilot forever. “Scheduling regular check-ins on your goals and giving yourself permission to change your goals, slow down (or speed up) your pace is also important as life circumstances change along the way,” Sirianni said.
“For those starting out, keep a pulse on the budget weekly and check in on money goals quarterly to evaluate what’s working, what’s not, as well as what shifts can be made to align your money with [the season you’re in], your goals and values,” Smith said.
Even the best-planned budgets need breathing room. That’s the appeal of a flexible budget. Life happens — and that can be a wonderful thing! Maybe you didn’t expect to get married this year, have a baby, relocate to a new city or have a job change that included a raise.
Build flexibility into your budget for exactly these scenarios, Rebell suggested. Think of it as a “life happens” fund. Set aside a percentage of your monthly budget (even 5% works) for these bigger, less expected expenses. This way, when surprises come up, you’ll have something set aside and your entire budget won’t implode.
Rethink any self-imposed rules that may no longer be worth sticking to anymore, according to Rebell. “Your priorities and financial means may have changed as you have moved through different life stages and that is okay,” she said.
If you just had a baby, some of that “eating out” budget might need to be reallocated to “childcare” expenses. Or if you’re working a side hustle, earned a raise or paid off debt, you might have more room in your budget to buy something that would have been considered a luxury to you a few years ago, Rebell said. Perhaps you have a line item for “self-care” every quarter that includes a massage. Or you might be able to give more to charities or send kids to a higher-end camp for the summer.
It’s okay to spend up if it’s part of your happy life and you can afford it. Just make sure you aren’t falling for lifestyle creep in every area of your financial life.
