5 Steps to a Better Spending Plan

Before you receive any money from a paycheck or any other income for the pay period, you want to sit down and “plan to spend” your money.  On purpose, you want to plan out where all your paycheck will be spent.  Often, we do not plan to spend our money and we end up letting others spend our money for us as we buy things that we did not plan to. 

Creating and working your spending plan is the way that you can manage your money better and stop living paycheck to paycheck. 

There are many benefits to creating a spending plan. 

Financial management success is one, however, for all the pitfalls and changes that come when creating and working with a spending plan, here are some steps to make it better.     

Step 1.   Call your budget a spending plan.

Instead of calling it a budget, call it a spending plan.  I do not know what it is but when most of us hear the word budget, we think of bad things, control, things we can’t do. 

So instead, call it a spending plan and think of it as a way to be a better steward of your money.  Just planning to spend your money, a spending plan, sounds like you are doing better.

Before you receive any money from a paycheck or any other income for the pay period, you want to sit down and “plan to spend” your money.  On purpose, you want to plan out where all your paycheck will be spent.  Often, we do not plan to spend our money and we end up letting others spend our money for us as we buy things that we did not plan to. 

Step 2. Track where your money is going.

You cannot effectively manage your money if you do not know where it is going.  Tracking your spending lets you know exactly where every dollar is going.  From the grocery store to the gas pump, tracking your spending will tell you where your money went.  Tracking allows you to have a more accurate spending plan.

 Sit down once a week or so with your receipts and write down where, how much, and what the money was spent for. 

Two things will happen.  First, you will see patterns in your spending that you did not notice before.  Second, you will see patterns in your spending that you will want to change, and that is the key to managing money better, changing behavior.

Step 3. Cut your expenses.

Once you track your expenses for a while, you will have a much better understanding of how, where, and what you are spending your money on.  You are not ready and able to cut unnecessary expenses. 

Go into deal mode and use coupons to save money.  Make a list for all shopping trips and never, never, never go shopping hungry.  Business is very adept at getting you to spend your money, therefore, maybe you stay at home and read a book, exercise, or do some yard works to keep your mind elsewhere.  Even try car polling and taking your lunch to work.   

Take a good hard look at all your spending and see where you can cut.     

Set up some financial goals for yourself like an emergency fund or a Christmas savings account.  Find a way to keep your goals in front of you.  Tape them to your bathroom mirror.  Take them with you when you are out and about.  Refer to them often, they will help you stay on track and prevent impulse buying.      

Step 4. If need be, increase income.

If you have less money coming in than going out, and after cutting expenses, you still have month left after the money is gone, you may want to try and increase your income.  A second job to help pay off debt is not a bad thing in the short term. 

Be sure to have a plan or goal for the money that you make at a second job and stick to the plan. 

Maybe you start a small business doing something that you like to do or do well for extra income.  The possibilities are endless.    

Step 5. Use spending plan tools to help you manage money better.

So, you ask, “What are spending plan tools?”  A spending plan tool is something that helps manage the budget or spending plan. 

Probably one of the oldest and best tools is the envelope system. 

Basically, in the envelope system you develop a spending plan, cash your check and you distribute your paycheck funds into different envelopes with your spending categories labeled on envelopes.  When the envelope is empty – it’s empty and no more spending in that category.  There are other tools such as calendars and some people use spreadsheets to track their different spending categories. 

Whether you use all these steps or none of them, do something different to manage your finances.  Do not keep doing the same thing and expecting a different result.  How do you manage your spending plan or budget?  Comment below and subscribe to my blog to get weekly spending plan and financial management tips.   

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