How to create your first spending plan

Spending money is part of life. You have to spend money. There is no getting around it.

The key is to spend money on purpose and to spend less than you make. Tell your money what to do and where to go. Don’t just wander through life wondering where your money went or how it got spent. That is not the way to do it.

Before we begin remember this:

• Creating a budget or spending plan that works won’t happen over night. If you have never done this before, it may take you 6-12 months of tweaking before you get one that actually works, one that you can stick to. Just don’t give up. Keep working on it!

How to create a spending plan: The steps.

1. Track your spending for one month minimum. I think this is an important first step. Most of us spend more than we think. Track every dollar for one month. You will probably find that you are spending money you were not even aware of. This step is important for step 2.
2. Write down your monthly income. I recommend a sheet of paper first. Keep it simple. Write down all your income for the month.
3. Write down your monthly bills/expenses. Write down things you spend money on, your bills. Hopefully, you have money left over after deducting the bills. If so, this means you have a surplus of money and you are not spending more than you make. That is good news (Most Americans spend 10% more than they make by the way). Hopefully this is not you.
4. If you have more bills than money. If this is you, then you have to make some changes and fast. You need to reduce your living expenses. Get rid of things you can live without for now (you can’t afford to keep them). Dining out all the time, cell phones, cable TV, magazine subscriptions, home phone, home phone extras that cost money like caller ID, etc. This sort of stuff. The idea here is to get rid of payments so you can keep more of your money on payday.
5. You may have to make some drastic changes. It’s possible you have a car you can’t afford. Or a home. You may have to consider selling them both to get control of your finances.

If you need more help, this little booklet may be a good place to start.