How to Create a Successful Spending Plan
New Era has started using the term “spending plan” when referring to how you track your monthly expenses. This is different from a budget because instead of focusing on limiting your expenses and how you can’t spend your money, it focuses on your goals and how you can spend your money. We are going to help you build your successful spending plan with the following tips:
1. Find a platform to utilize
When tracking your monthly spending, expenses, and savings, you will need to use a platform that organizes your information and makes it easy to make changes. Most people are fond of making spreadsheets or simply working with pen and paper to create their spending plans. Whatever method you choose, pick one that works best for you!
2. Outline your spending and saving goals
Before you can think about how much money you spend and where you want to spend it, you have to determine your goals. Are you willing to give up your morning coffee or monthly streaming subscription? What financial changes are you going to make to live well without depriving yourself?
Also consider your saving goals for retirement or vacation. Everyone needs time to relax and de-stress from life. Determine what you want to fit into your budget, but understand you may not be able to include everything. One of your goals may be to slowly save up for a trip at the end of the year or take a short, mini vacation over the weekend. Choose what best fits your financial situation and your goals – it is important to think about both short-term and long-term.
3. Calculate monthly income
Once you outline your goals, it’s time to get into the numbers. (Don’t let the calculations intimidate you; New Era is going to make this simple, easy, and quick!) Figure out your monthly income, including any other sources of income outside employment. Add up all the numbers and label it on your spreadsheet. To easily keep track of the numbers, you should highlight them with appropriate colors. For instance, money-earned can be highlighted in green.
4. Add up bills, payments, and savings
Now you can track your expenses. Where do you plan on spending your money? Add your monthly expenditures, accounts with auto pay, and any recurring bills to this section. Factor in your savings to see how much you can afford to put away each month. You may choose to add your additional savings, vacation, and other special expenses here once you have determined how much money you will have at month’s end. Highlight this number in any color other than green to easily distinguish your income and spending categories.
5. Determine debt
If you are in a debt settlement program, then you are making monthly payments to achieve financial freedom. Include these payments in your spending section. If you are not in a program or making monthly payments, then you first need to determine how you will pay off the type of debt you have. There are debt relief options and financial resources available to help you find a plan that is best for you.
6. Prioritize and finalize
Subtract your spending from your income to determine how much money you will have left over at the end of each month. Add in additional savings and vacation now if you decided to leave them out prior. You may have to spend some time with the numbers to determine what costs you can cut and which do not align well with your goals. The key to financial stability is making decisions that reduce what you owe, but also do not make you feel limited in your lifestyle. You should not be expected to kick your morning coffee habit or only spend your money on your bills and nothing else. Realistic thinking is pivotal!
7. Review and repeat
Review your spending plan and adjust as needed each month. You should regularly refer to your spending plan to keep your finances in check and ensure you are accomplishing your goals.
Do you need help achieving financial freedom? Contact one of New Era Debt Solutions’ counselors today for a free consultation to find the debt reduction option that best fits your needs, situation, and budget.