The Spending Plan
Regardless of whether you are a millionaire or making minimum wage, the foundation of financial success is the same: create a spending plan. Taking charge of one’s finances is about analyzing what you have coming in and then developing a reasonable and goal-oriented plan for what goes out; a proactive, not reactive, approach. Essentially, a a spending plan is a tool that can help you make the most of your money.
Use the Budget worksheet to list your income and expenses. If you don’t know exactly to the penny what you are spending on groceries, clothing, or other items, don’t fret. Just put down your best estimate for now. By tracking your expenses for a period of time (you can use the Expense Tracking worksheets or a computer spreadsheet), you can create a more accurate spending plan in the future. Don’t forget to include debt payments and savings. For periodic expenses, such as vacation, determine the annual amount and divide by twelve.
Weekly Expense Tracking Worksheet
Monthly Expense Tracking Worksheet
Though no two spending plans are alike, there is a common rule: expenses should never exceed income. If you are currently spending more than what you are earning, a possibility because of credit, think about ways you can increase your income and/or reduce your expenses. Can you get a part-time job? Cut back on dining out? Skip the daily $4 mocha latte? Get a cheaper cable package or cut your land-line phone? Increasing income can be difficult, but most people have some expenses they can trim. Honestly assess what is a necessity and what isn’t. List the changes in the proposed column of the budget worksheet.
Your spending plan is only helpful if you follow it. Tracking your expenses on an on-going basis can help you recognize when you should stop spending because you have reached your limit in a particular category. However, if you overspend once in a while, try not to get discouraged. No one is perfect. If it happens often, you may need to adjust your budget so that it is more realistic. For example, perhaps you can’t keep your food costs at $150 a month, but you can cut back on your clothing purchases.