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!