How to Prepare a Spending Plan

A spending plan, or budget, is your first step in building financial responsibility. A spending plan organizes your estimates of income and expenses over a set period of time-normally a month.

A spending plan can help you:

• Stay out of debt
• Identify areas of potential savings
• Provide a cushion for unforeseen expenses
• Save money for long-term goals
• Avoid impulse spending

PHASE ONE - DEVELOP A SPENDING PLAN

Estimate your monthly income and expenditures:

• Gather information from your paycheck stubs, most recent statements, payment booklets and available receipts.
• Look through your check register and/or credit card bills for periodic purchases you may easily miss.
• Divide annual figures by 12 for monthly amounts; semiannual figures by 6, etc.
• Make "best guess" estimates when necessary.
• Add your own specific categories.

PHASE TWO - MONITOR YOUR SPENDING

Track all purchases and payments:

• Write down all cash purchases in a small notebook.
• Save all receipts for review.
• Enter your payments and purchases into your spending plan (Try this daily or weekly in the beginning.)

PHASE THREE - REVIEW YOUR PROGRESS

Compare your actual spending to your spending plan:

• Identify areas that may require adjustments.
• Examine your spending to reduce or eliminate some expenses.

PHASE FOUR - MAKE CHANGES

Adjust expenses and/or income to reach your long-range financial goals:

• Continue to maintain a monthly spending plan.
• Occasionally reward yourself for your successful money management!