How to create a Spending Plan

One of the biggest benefits of using a spending plan (AKA a budget) is that you are in control of where your money goes.  It allows you to make financial decisions based on fact, not emotion.  You can control your spending, get out of debt, save consistently, and give generously using a spending plan. The key is to create a plan that works for you then use it.
 
The first step is to get familiar with you income and expenses for 30-90 days. This includes all your income - salary, odd jobs, gifts, bonuses, etc. It also includes all your spending via digital wallets, credit cards, automatic payments, debit cards and even cash. Reviewing a month or more of income and spending will give you a good sense of what you’re actually earning and spending, and exactly where the money is going.
 
In order to get totally familiar with the details of your finances, you may want to be real hands on and use paper and pencil, a spreadsheet or note cards at first.  When you are thoroughly familiar your finances, you will have enough details to analyze and choose an app to track income and outgo. When looking at different apps, consider the following:
·      It is available for your device(s)? 
·      Is it possible to use the same app on a variety of devices - laptop, tablet and phone?
·      Can you use a free trial version to see if it works for you? 
·      Is there a one-time cost or a monthly fee?
·      Will it automatically synch to your bank and credit card accounts?
·      Can you customize the categories or are you stuck with ones that are predefined?
·      How robust are the security features?
·      Can you track actual spending against your plan? (If not, the tool isn't much use.)
·      Is there training and support available online?
·      Does it have a bill reminder function for monthly bills?
·      Can you and your spouse share information?
·      Can you set aside money in your budget for those non-regular expenses such as car insurance, vacation, Christmas, etc?
 
The key is to find a system you’re comfortable using.  And then use it to look at the monthly spending vs. your monthly income and determine if you have a deficit or surplus.
 
If you spent more than you made and have a deficit, you'll need to cut back on some spending. If you made more than you spent, where is the extra money - did you forget to capture money you spent or is your savings account larger?
 
The last step is an ongoing review and adjustment. Recording your income and spending on a regular basis enables you to stay current with your finances, and quickly discover any issues.
 
It’s also important to realize that a spending plan is dynamic. Your financial situation is constantly changing and your plan needs to be updated as changes occur in your life.
 
You might have a baby, get a different job, pay off a lot of debt, buy a house, or retire … you’ll be making adjustments due to major life changes as long as you use your spending plan. But making on the fly daily adjustments may mean you are out of control.
 
The good thing about using a spending plan is that it doesn’t require endless hours of bookkeeping. It shouldn’t take more than an hour of your time each week.  Being diligent with your budget is a small price to pay to stay on top of your finances. The time spent is well worth it.
 
“The plans of the diligent end in profit, but those of the hasty end in loss.” (Proverbs 21:5)
 
Coming soon ... developing a crisis budget.

Learn more About Compass Catholic Ministries