Rethinking Your Spending Plan

I am a huge proponent of spending plans because they help people manage money and expenses better. If you find that your spending plan is not working as well as you had hoped, there are a few things you can do to rethink your spending plan and find a better way.

An Improved Way

Yes, your spending plan numbers must work, but your life must work, also. Otherwise, you’ll feel like your spending plan is restrictive, making it harder to stick to. You want the spending plan to work for you and not feel like it’s restricting you from living your life. Below are some tips to help you rethink your spending plan.

Review Your Expenses

Evaluate your expenses and find where you can cut back. Identify any unnecessary expenses and see if there are any areas where you can reduce spending. Track your expenses to help you find spending plan categories you can decrease.

Set New Goals

Revisit your financial goals, spending, and saving, and make sure they are still realistic and achievable. Your situation may have changed, and there is now a need to change your goals. Setting new, specific goals can help you stay motivated and on track.

Make a New Plan

Based on your new goals and expenses, make a new spending plan. Be sure to include specific, actionable steps to help you reach your goals. You want to review and create a new spending plan whenever your situation or circumstance changes.

Track Your Progress

Keep track of your progress by regularly reviewing your spending plan and monitoring your expenses. Schedule time at least once a week to review your spending and how you are meeting goals and objectives. This will help you identify any areas where you need to adjust.

Be Flexible

Remember that life happens, and plans change, so be prepared to adjust your spending plan accordingly. A spending plan estimates how you will send your money over a given time frame, and estimates change. You should be ready to change or adjust your spending plan.

Seek Professional Advice if Needed

If you are still trying to make a realistic spending plan, consider seeking help from a financial coach, counselor, or spending plan expert. They can help you develop a plan that you can stick to and that works for you and your family.

You will know you’ve found the right strategy when you are excited about putting it into action. If you aren’t enthusiastic about a design, keep brainstorming until you’re thrilled with your new plan.

Rethinking Your Spending Plan

By adjusting your spending plan using the points above, you can rethink your spending plan and make the changes need to keep you on track to meet your financial goals. Creating a spending plan is a process, and changes and adjustments are part of the process. A spending plan should solve problems and avoid making new ones.

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Common Mistakes When Creating a Spending Plan

Creating and using a spending plan is more about managing behavior than money. What the spending plan does is help you to reach your financial goals. Money is the tool a spending plan uses to achieve financial goals. Below are some common mistakes when creating a spending plan.

Starting to create a spending plan without clear goals.

Clear goals make it easier to prioritize spending and ensure you’re on track. A spending plan’s goal must be what you are spending or saving money for. Before you save for a house, you should know what the type of house in the neighborhood you want to live in will cost. If you are saving for retirement, you should understand what you need to have saved by the age you plan to retire to afford the lifestyle you want. When starting a business, you should know how much you will need to spend upfront. The goal should never be about dollars but the purpose and reason behind the dollars.

Creating a spending plan without first tracking spending.

Tracking spending allows you to know where your money is going. When you do not following how much money is spent can make it hard to stick to a spending plan. I believe that if you do not track your income and expenses, you are not successfully managing your money because you do not know where you are spending it; you do not know where it is going, and therefore you cannot – effectively manage it.Tracking your spending helps to make your money, and you’re spending more real. You will begin to see it come in and go out and see it as a tool to help you achieve your financial goals.

Forgetting about small expenses.

It’s easy to overlook small, recurring expenses that add up over time, like the donut shop or vending machine. Be more aware of transactions that are quickly forgotten. Some online transactions, transactions without a receipt, can be soon forgotten. Take special steps to remember these.

Get a receipt or find a way to track expenses, even the small ones. There are only so many places where you can spend money and not get a receipt. If they do not give you one, ask for one. Additionally, make it a habit of putting all your receipts or log of expenses where you can find them.

Creating a spending plan without having an emergency or contingency fund.  

Without an emergency fund, unexpected expenses can derail a spending plan. It may be the most significant difference between those who manage to stay afloat and those who are sinking into worse financial debt. Emergency savings of 3 to 6 months of expenses allows you to meet unexpected financial challenges. The emergency fund not only allows you to cover these expenses but also gives you the peace of mind that you are prepared for financial emergencies that will arise.

Not reviewing your spending plan periodically for needed adjustments.

The spending plan process is living and breathing, and your spending plan needs to be checked regularly to ensure it’s still doing what you want it to. As a financial coach and counselor, I encourage clients to pick a day, choose a time, and prepare a place to work on their money, and then consistently work on their money during the time and place they choose, creating a habit.

Changes in your family situation, such as a child, will significantly impact your spending plan, and It’s essential to adjust spending plans accordingly. Remember that your spending plan is an estimate of how you will spend your money, so as your situation and circumstances change, your spending plan should also change. Spend time working on your money and adjust your spending plan as circumstances change.

Building a spending plan without regular savings.

Your spending plan must include savings that connect back to your financial goals, such as retirement, emergency fund, or other long-term goals. Your spending plan should have two or three categories: fixed, variable, and possibly occasional expenses. Once you allocate money to your fixed expenses, your first variable expense should be savings. Your savings is a variable expense, so it could be more one month and less the next depending on other things going on in your life. 

What is your why? Determine why you are creating a spending plan as it will help you avoid the common mistakes when creating a spending plan. Often people will make a spending plan because they want to get out of debt, save for retirement, or manage money better, but a spending plan is about your current situation also. Your spending plan should also make sure the life you are living currently is fulfilling. Just don’t plan to purchase a house or plan for retirement, plan for the other aspects of your life as well.

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