Developing a Spending Plan

 “A budget feels like a diet. It curtails your freedom. But with a spending plan, the choices are yours.”

Deena Katz Moral

1. Determine monthly income. Income is the money you bring in on a consistent basis and includes, but is not limited to, the following: regular income from primary job(s), regular overtime, tips, public assistance, child support, pension, social security, disability, commissions, bonuses, etc. If some of the regular income is flexible, choose a smaller amount but do include it in the total.

2. Determine monthly expenses. Expenses are things you spend money on/for and includes housing (rent/mortgage), utilities, telephone, car payment(s), car repair and maintenance, gasoline and oil, insurance, medicals, groceries, eating out, clothing, snack items, doctor visits, pet supplies, etc. Include small expenditures as well as large ones.

Calculate yearly car repairs and maintenance (gas/oil/washes) and divide by twelve to arrive at the monthly expense. Do this on other items also that are not spent on a given date, such as groceries and clothing. Relegate the new school clothes purchases to a monthly expense. This way you will not be caught unawares and be in crunch time.

3. Know where your money goes. For the next two months, record all of your purchases. Record what you bought, the amount, the date and time, whether you used cash, check/debit or charge card, and your emotions at the moment.

Note the impulse buys. Become aware of emotional purchases. Buying to feel good is a temporary false fix and makes you feel worse in the long run. Think and reason before buying. Remember, stuff does not bring happiness.

4. Look at other expenses and rank them in order of importance to you. Are you spending too much on fast foods? Where are you wasting money? “Don’t worry that you’re going to lose your dignity. Engrave this motto on your mind, ‘Wherever I am, whatever I do, there is a way to do it for less’.” Mary Hunt

5. All successful spending plans require trade-offs. When you determine your core values and have something worth sacrificing for, it transcends the situation and sacrifice is not a sacrifice. “I choose to live within my budget; I will buy cool aid instead of more expensive soft drinks.” “We can rent movies rather than going to the movie house.” “I choose to live within my budget, so we can do without cable for a while.”

6. All successful spending plans require trade-offs. When you determine your core values and have something worth sacrificing for, it transcends the situation and sacrifice is not a sacrifice. “I choose to live within my budget; I will buy cool aid instead of more expensive soft drinks.” “We can rent movies rather than going to the movie house.” “I choose to live within my budget, so we can do without cable for a while.” Give up about keeping up with the neighbors. Make relationships more important than stuff.

7. Discipline yourself to paying by cash, debit card, or check. If the money is not in the bank, do not stress yourself by extending credit.

8. Limit yourself to one credit card and pay the balance each month. If you have existing credit card debt, pay off the high interest cards first, then use the extra amount to reduce the next highest, etc. This is also an excellent strategy to apply to reducing mortgage and car loans.

Here is a formula for financial success:   Income - Outgo = Zero

If you do not tell your money where to go, you will wonder where it went. Look at every penny that comes in and determine where it will go - giving, saving, living.