--- title: Help! The Rates Ate My Budget description: Read this blog by Sue West, President, to learn what to do as rates begin to climb in 2022 and your budget set in 2021 is no longer relevant. image: https://blog.plansmith.com/hubfs/ALMIRR%20PostcardBleed2022.04.4%20(2).png --- [CALL TOLL-FREE 1-800-323-3281](https://www.plansmith.reachproductions.net/project/call-toll-free-1-800-323-3281/) [![Plansmith](https://blog.plansmith.com/hs-fs/hubfs/Plansmith-Logo.png?width=764&height=135&name=Plansmith-Logo.png "Plansmith")](https://www4.plansmith.com) - Solutions - [Budgeting](https://www4.plansmith.com/budgeting/) - [ALM](https://www4.plansmith.com/alm) - [ALM Advisory Services](https://www4.plansmith.com/alm/advisory-services/) - [CECL](https://www4.plansmith.com/cecl/) - [Strategy](https://www4.plansmith.com/strategy/) - [Market Intelligence](https://www4.plansmith.com/market-intelligence/) - Products - [StrategyGPS](https://www4.plansmith.com/strategygps/) - [Compass](https://www4.plansmith.com/compass/) - [BankersGPS](https://www4.plansmith.com/bankersgps/) - Resources - [Blog](https://blog.plansmith.com/) - [Videos](https://plansmith.wistia.com/projects/7qemazkqii) - [Compass Tutorials](https://info.plansmith.com/compass-tutorials) - [Lunch N’ Learn](https://info.plansmith.com/lunch-n-learns) - [Webinars](https://www4.plansmith.com/webinars/) - [About](https://www4.plansmith.com/about/) - [Schedule A Discovery Call](https://www4.plansmith.com/contact-us/) - [CALL TOLL-FREE 1-800-323-3281](tel:8003233281) # Plansmith Blog # Help! The Rates Ate My Budget Posted by [Sue West](https://blog.plansmith.com/author/sue-west) on 4/25/22 10:58 AM - [Tweet](https://twitter.com/share) Planning in a Rising Rate Environment….didn’t see this coming? We all knew that rates would be on the rise in 2022; it’s a normal reaction in an inflationary economy. But how many of us were able to predict when, how much, and how often those changes would occur? Not to worry, one of the greatest advantages of a full simulation model is its ability to adapt! Managing your current plan should be no big deal as your Plansmith system uses dynamic models and a monthly RateForecast download to keep your plan current. This is truly where our products perform because of their ability to provide management with balance sheet, income statement, and yield/cost information that is current and reprojects the anticipated outcome at year end. Using your active plan, the one updated with actual performance, it’s easy to anticipate rate changes and balance sheet growth, and measure the impact on earnings in a matter of seconds. But this ‘Budget’, the one you’ve been dragging along with you since 2021, is no longer effective as a guide for your performance targets. Typically your active plan is your guide throughout the year, comparing to Budget for the purpose of focusing on reaching specific performance targets.  However, in times such as they are, the Budget becomes a distraction and frustrations mount trying to address large variances during board meetings.  Now what? Well, it’s always been a misconception that a Budget is an annual event. The only time this is true is during environments when rates remain flat, and, for that matter, so do growth and earnings. We’re living during interesting times with rate fluctuations and new opportunities for growth and earnings. We need to wake our Budgets up! So, what are you supposed to do with that old Budget? Let it die…yes, seriously. It’s easier than you think to create a new Budget and set new goals using your Plansmith model. First of all, your current plan, the one updated with actuals, should be in great shape. It was designed from the Original Budget, then updated with current history and revised rate projections, either manually **or** by using the RateForecast download. This is a great place to start, agreed? Review this plan with fresh eyes and edit where necessary.  The revised data will reflect changes in plan direction, not in the goals themselves. These realigned targets are then submitted to the board for approval. Simply Lock the Budget once again and over-write the full year of 2022 Budget data. The ‘new revised Budget’ will consist of X number of months of actual data, plus a revised budget forecast approved by your board. This will re-confirm targets based on current rate and growth assumptions, providing you with a fresh and informative Variance Report going forward into this year. It is very common for many of our clients to reforecast and re-lock their budgets mid-year. 2022 may be exceptional in that this routine will likely need to take place several times throughout the year. Remember that reforecasting is a method of making adjustments for current conditions; it does not necessarily mean your targets will change. Goals, such as NIM, ROA, ROE, and growth will remain the defining factors of any Budget. How you get there is in your ability to analyze, learn, and adapt. And that’s what planning is all about. ![Sue 2022 photo](https://blog.plansmith.com/hs-fs/hubfs/Sue%202022%20photo.jpg?width=102&name=Sue%202022%20photo.jpg)Sue West *President* swest@plansmith.com   Topics: [interest rate risk](https://blog.plansmith.com/topic/interest-rate-risk), [budgeting](https://blog.plansmith.com/topic/budgeting), [rising rates](https://blog.plansmith.com/topic/rising-rates) ### Subscribe Now! ### Posts by Tag - [community bank planning (52)](https://blog.plansmith.com/topic/community-bank-planning) - [community bank strategy (52)](https://blog.plansmith.com/topic/community-bank-strategy) - [community bank (49)](https://blog.plansmith.com/topic/community-bank) - [community bank budget software (45)](https://blog.plansmith.com/topic/community-bank-budget-software) - [credit union planning (44)](https://blog.plansmith.com/topic/credit-union-planning) - [community bank budgeting (42)](https://blog.plansmith.com/topic/community-bank-budgeting) - [budgeting (39)](https://blog.plansmith.com/topic/budgeting) - 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