5 Steps to a Super Spending Plan
Hi Money Masters!
Hebrews 13:5 says “Keep your life free from love of money, and be content with what you have, for he has said, “I will never leave you nor forsake you.” This scripture suggests that we need to spend less than what we earn because being content with what you initially have is a path to peaceful living. So this week, let’s talk about how to start managing the money we have right now.
There are some words that, when used, just sound better when there’s a little bit of a spin put on it. Take the word “budget” for example. Budget is one of those words that has a pretty basic meaning. It’s straight-forward, rigid and doesn’t allow for a lot of wiggle room when it comes to your money. Plus, it doesn’t usually incite a feeling of excitement. Let’s jazz it up a little, shall we?
Instead of a budget, we are going to develop a “spending plan”. This sounds like it incorporates more action and flexibility. Like a budget, it does still require discipline and organization. But, we all know that “plans can change” which makes the spending plan a much better exercise in financial management.
A spending plan helps outline how much income is earned and what expenses are affecting your cash flow. With 5 easy steps, you can create your own spending plan to get a handle on your finances!
STEP 1: Do the Math
Don’t worry, this is relatively simple math. I won’t ask you to solve complex algebraic equations. Just figure your take-home income (money you get after taxes) and subtract all your regular, day-to-day expenses (bills, mortgage/rent, groceries, child care, etc.). The amount left over is called “discretionary income”. This is the amount you can move around and be flexible with, if needed.
Step 2: Look to the future
In this step, I want you to think about any expenditures you may have coming up in the future. Are you planning a vacation? Do you have home improvements to make? You may have small or large expenses. Consider birthdays, holidays, vehicle maintenance, and any other situation in which you might need to spend money outside of daily expenses.
Step 3: Save
Next, take some or all of the amount of discretionary income (what was left over from Step #1) and put it in savings for those items you thought about in Step #2. Now, here is where the flexibility of a pending plan comes into play…
Step 4: Needs vs. Wants
Now that you have your desired amount for saving, grab your favorite pencil (with an eraser) and write down the list of items from Step #2. Next, prioritize the items. You can always revise and reorder.
Step 5: Stay Organized
Keep track of your discretionary income and check-off the items that you’ve spent money on. You’ll be able to see right away if you have room to go out to dinner or something else that would be a spontaneous expense.