Spending Plans – A Roadmap to Financial Stability

Would you jump in your car and head towards BC without referring to a map?  Would you build a house without plans?  Probably not!  Then why would you spend money without a plan.

For many people, the idea of developing a spending plan is overwhelming.  This can be because they have no idea where to even start or have tried before and it never seems to work.  A spending plan – as known as a budget –  is simply a way to allocate money in an effort to ensure all of your needs and, hopefully, some of your wants are met.  Following the plan once it is set is key and tracking your expenses allows you to do that.

Creating a spending plan will take some trial and error.  Don’t give up if it does not go according to plan.  The trick is making the plan match what you are realistic spending.  It is easy to get caught setting an unrealistic number for a category.  In reality, to create a solid budget plan you have to start backwards.  Once you have tracked what you spending, it is easier to make a plan based on actual numbers. You can make adjustments if you know what the numbers actually are instead of guessing.

A spending plan does not have to be complicated.  It is essentially adding up your income and subtracting your expenses.  Start with your basic regular monthly expenses (housing, food and transportation). Then allocate money for periodic expenses (like car repairs, house maintenance, clothing). Even if they are not occurring that month.  You should set the money aside for when they do happen. Also put your monthly debt repayments into the plan.  If you find after you have done this you are left with a negative figure then review the options: increase your income or decrease your expenses.  If neither of those help, it may be necessary to look at restructuring your debt.  If you find that you have money left over after meeting all of your obligations, then you put that money into a savings or investment account. 

Budget plans can be weekly or monthly.  A weekly spending plan tends to be easier to follow because money is spent on a weekly basis.  It is important to have a plan so that you can limit spending to meet your financial obligations.