Create A Spending Plan In Seven Easy Steps

It's time to tell your money where to go. A spending plan is the method we will use.

You've probably heard of spending plans or the B word (budget) but I prefer to use the term spending plan. They basically work the same way. But...

the word budget sounds so cold, so restricting, soooo boring.

What is a spending plan?

A spending plan is simply a way to keep track of your money month to month. It allows you to record your spending, and hopefully your saving habits.

The Seven Steps

1. Track your expenses and savings or retirement accounts for one month, (see my post Keeping Track Of Your Cash)
2. Use any of the following to track your information; a pad and paper, an Excel spreadsheet, Quicken or Microsoft Money.
3. Create a category for every item or event you spend money on each month.
4. Take your estimated income for the month and break it down into each category. For example $250 may go to your car payment, and $1500 for rent.
5. Some items will be fixed, such as your rent or mortgage. Others will be flexible such as the minimum balance on your credit cards, or the cash you put into your savings. (If you don't have enough cash left to put into savings don't worry for now, we'll get to that in a later post.
6. Don't forget to list any expenses that are not occurring every month but come up throughout the year. For example, spending on birthday gifts can occur during any certain month of the year, so add that spending to your plan for the month they fall on.
7. Create a plan every month.

Conclusion

A monthly spending plan plays an important part in getting you on track financially. Once you get the hang of it, it should only take you about fifteen minutes a month to complete it. Of course you can spend more time crunching the numbers if you're anything like me and enjoy that sort of fun.