Spending Plan Basics
A spending plan is often referred to as a budget. Even though most people think of cutting costs or penny pinching when they hear budget, it is a valuable tool that does not need to have a negative feeling for you. The spending plan is a system for how you spend your money. The spending plan should be viewed as a positive tool that helps you plan and achieve your long-term financial goals.
It will take time and discipline to achieve your financial goals. Your spending plan might require you to change some habits and create more financial discipline. This is what I have found to be the hardest part. With the spending plan you will be able to know when and where your money is being spent and where you stand in being able to achieve your financial goals.
The first step in achieving those financial goals is to create your spending plan. There are two parts to this. The first is your income. You have to know how much money is available after taxes, health insurance and other items that come directly out before you can spend. The second part is your expenses. This needs to be based upon current expenses and habits.
The second step is to start monitoring your spending. I have found that even though I have a spending plan what I do differs at times. You need to take a fixed amount of time and track your spending compared to your plan.
The third step is to make adjustments. There are really two things you will come up against. You will find that you can either spend more than you bring home or you don’t stick to your plan. You will never achieve your financial goals if you are spending more than earn. I remember a quote that said, “One of the best ways to lose weight is by eating fewer calories than your body consumes”. I laughed because that is the only way to lose weight (non-surgically). Finances are exactly the same. You will also find that your spending habits differ from your plan. In either case, you need to continually evaluate and make adjustments: changing cell phone plans, cutting out certain expenses, etc.
A spending plan does many things for you. The obvious one is that it allows you to achieve your financial goals. This means you can start to pay down debt, prepare for retirement, and prepare a rainy day fund. The one thing it does for me is gives me a piece of mind knowing that I am in control. Money doesn’t control me. I control my money. Achieving your financial goals doesn’t happen overnight. It takes diligence and time. Good luck on your creating your own spending plan.
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