Getting Started on a Spending Plan

Getting started on a spending plan doesn't have to be hard, it just takes a little bit of planning and a whole lot of honesty.  Many of us know where the big money goes - rent, car, doctor, etc.  The trouble we have is knowing how to find all those smaller dollars that seem to evaporate into thin air if we are not watching their every move.

Lets break the budgeting process down into three steps:

Step 1:  Make a list of those regular expenses that happen each month.  For expenses that change month to month, make a best estimate or use your last month's bill as a starting point.  Here are some examples of expenses that may be on your list (you may have others):

  • Rent
  • Utilities
  • Phone (landline and cell)
  • Internet
  • Cable/Satellite
  • Groceries
  • Car Payment
  • Gas
  • Insurance
  • Credit Card Payments
  • Eating Out
  • Entertainment
  • Pharmacy
  • Miscellaneous (what's that?)
  • Medical Expenses
  • Savings
Did you see that last one?  Kind of sneaked that one in on you!  Savings should be a part of everyone's regular spending plan if they are moving forward and not backward.  Emergency savings first and then longer term savings.

Step 2:  Put on your thinking cap and see how many expenses you can think of that don't happen every month.  You can use the Periodic Expense Planner in the resources section of this blog.  Some examples you may have include:

  • Property Tax
  • Home Insurance
  • Income Tax
  • Furniture and Appliances
  • Home Repairs
  • Memberships and Dues
  • Holidays
  • Vacation
  • Subscriptions
  • Gifts
  • Weddings
For these expenses do your best to estimate the total cost for last year and then divide by 12.  That is how much you should be saving each month for these items.  Even if the expense is not for several months away, continue to save it in a safe location (like a savings account you will not touch) until the expense is due.

Step 3:  Search out the spending leaks.  Leaks are any expenses for which you do not have a planned allocation.  Often we lump them into "miscellaneous" but if we are to control our cash and not have our budget control us, we need to know where all our money goes.  For these expenses, use a method that works for you, envelope, receipts, ledger (you can find some of these methods in the resource section of this blog).  Write down every penny spent so that you can evaluate how much is really necessary and how much is discretionary.  It may take a couple of months to find all the leaks in your spending plan, but as you plug the leaks and make a plan for the necessary spending you will find yourself in control and feeling good!

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