A well thought-out spending plan is essential for financial success. Without a spending plan, your money is not likely to make it where you want it to end up. Building a spending plan doesn’t have to be a complicated matter, and there are many ways one can go about it. Here are five steps to building yours.
1. Find Your Total Net Income
Your net income is what you bring home financially after taxes and such have been taken off of the money you make each month. Write this number down. If you have more than one job or income source, be sure to add it all up together.
2. Find Your Total Monthly Expenses
Think of all the money you spend on a monthly basis. You will want this to be as complete as possible. Think of all your necessities such as shelter, food, car payments, gas money, utilities, and other costs of living. You will want to keep receipts in order to accurately estimate what you need for each area of expenses. If there are areas that may fluctuate, such as utilities, always overestimate what you will need to pay these bills.
Write all these expenses down. Take your time on this as there are many living expenses that do not come easily to memory. You want this to be as comprehensive a list as possible. By being knowledgeable about what it costs to live, you will be able to give yourself a mental check each time you spend money.
3. Decide on Monthly Savings
Above and beyond your basic necessities, decide what you would like to be able to save on a monthly basis. This is an area you want to be sure not to forget, even though it may not seem as pressing as other things. Choose your amount to save and add this to your list of expenses.
4. Figure Out What Is Left to Spend
When you have completed the above calculations, you are left with your monthly spending amount. As long as you have accounted for all of your monthly expenses, you will be left with a clear understanding of what you really have to work with. There are several ways you can go from here.
Break it down into a weekly spending amount if you desire, in order to avoid being left with no money at the end of the month. Or categorize it into anticipated spending so that it can be spread out and not used up only for one area. Any way you choose is fine, and each individual will have their own preference.
5. Revise Until Everything Fits
You may decide to go over your plan again and again before you even use it. Or perhaps you prefer to go ahead and try it out and revise it as time goes on. A little bit of both can be helpful. Take all the time you need to make your spending plan right for you and your situation. This is your life, and your plan need not be perfect for anyone but you.
Creating a workable spending plan does not need to be a complex process. With even a short amount of time, you can come up with a plan that will transform your financial life. Take a few minutes and build a spending plan for yourself that will serve you well in the years to come.