Overallocation

What is Overallocation? Overallocation happens when the total amount of money assigned to your budget categories exceeds the income you’ve entered. Essentially, you've planned to spend more money than what is available to you, leading to an imbalance in your budget.

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For example:

• If you enter $1,000 as your income but allocate $1,100 across expenses like rent, groceries, and entertainment, you've overallocated by $100. This means you've budgeted more than you actually have.

Until the overallocation is fixed, you can't fully trust your budget numbers!

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Impact on Zero-Based Budgeting vs. Classic Budgeting

• Zero-Based Budgeting: In this method, every dollar of your income should be allocated to a specific purpose, leaving no money unbudgeted. Overallocation undermines this approach because it means you’ve assigned more than you actually have, making it impossible to balance your budget.

• Classic Budgeting: Here, you may have some flexibility with categories like savings or leftover balances, but overallocation still poses a risk. It creates a false sense of available funds and can mislead you when making financial decisions.

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Why It's a Problem When your budget is overallocated, you can’t trust the numbers. You might think you have enough to cover an expense, but in reality, the extra funds simply don’t exist. This can lead to overspending and poor financial decisions because your budget no longer reflects your actual financial situation.

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How to Fix Overallocation To correct this, you need to reduce the amount allocated to certain categories until the total matches your actual income. In the earlier example, you could reduce the grocery and dining out categories by $50 each, balancing your total allocation with your available income.

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Key Tip: Maintaining accurate allocations is crucial for ensuring your budget remains a trustworthy tool for making informed financial decisions. Without fixing overallocation, your budget numbers will mislead you, increasing the risk of financial mismanagement.

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Overallocation Warning on the Home Page

The app keeps you informed when your allocations exceed your available income. If you've overallocated, a clear warning will appear right on your home page, showing the exact amount by which your budget is overallocated. This helps you quickly identify the issue and take action to adjust your budget.

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Check Allocation History

If the overallocation problem has occurred recently, you can dive into the allocation history to see what changes were made. This feature helps you track down any adjustments or misallocations that could have caused the issue, so you can make the necessary corrections and get your budget back on track.