When you hear the phrase, “I have to get…” ringing in your head, you are in the grips of a spending thought. “S/he wants this and I have to…” signals you are about to lose the tune. That noise in your head is not the voice of reason, it is the scared or deprived kid inside who is experiencing an impulsive urge. An urge is not a need, and it may not even be a want. It is more likely an old habit which is dominating you.
Old habits are not that hard to break if you put new habits in their place. Once you are aware that you are being lured into the mall by the ‘voice’, you can use other voices to turn your car around. Try “A spending thought is not a command!” or “I don’t have to do this,” or “Easy does it!”
But why does this type of thinking get a hold of you in the first place? It is because you do not have a plan for how you will allocate your money this month. “Failing to plan is planning to fail.” Catchy, hm? Truism often are.
A Spending Plan takes into consideration your present preferences for spending. They are not wrong. They are just what you like to spend your money on. If you can afford all the things you want in your life right now, then you are not reading this blog! Most of us have to make choices. But, we never have to do without something we really want. The Spending Plan gives you permission to have both what you want, and need, without ignoring the bills in your life.
You are on top of your spending when you plan to get what you need and want within the boundaries of time and money. Those are the two variables. If you don’t have a lot of money, it will take time to save up for the items you want. If your life is a perpetual blur of busyness, you may be using money to take a few shortcuts. Yet, are you getting what you really want? You need clarity for that, and a plan.
A plan can be an outline or a design which stresses the final outcome of a plan. A Spending Plan is an outline of how you will spend your money this month, but with forethought. The final outcome is that you will meet your needs and wants not only for this month, but also down the road to your dreams.
Here’s how it works: You total your income for this month. If yours is a regular paycheck, it is easy. If yours is a variable income, use your best guesstimate. Your guesstimate may become your month’s income goal.
List all the things you have to pay this month, and want to buy. Categories are helpful in this case. Here are 16 broad categories to start: Spiritual, Housing, Food, Transportation,Clothing, Personal Care, Health care, Dependent Care, Entertainment, Education, Vacation, Personal Business,Gifts, Investments, Taxes, Debt Repayment.
Write the amount you think you need to spend this month beside each category. Use dollar figures if your income is stable, and use percents if it is variable. For example, Clothes, $20, Groceries $100 for a stable income. Clothes 2%, Groceries 6% if your income fluctuates. If you use percents, multiply the percent times your income to get the dollar figure. If you guesstimate your income to be $1500 this month, and you want to save 2% for clothes, then you have a dollar figure of $30.
Total up those amounts. Compare them to your income. If your income is too low, shave off a bit from several of the categories; if your income is higher than the total, add a bit to several categories. Voila! You now have a plan for your spending.
Now, how are you going to stick with it? One thing for sure, you will have an easier time of doing this with a Spending Plan than with a budget. A budget is restrictive while a Spending Plan encourages choices. If you decided that you would spend no more than $20 in clothes, then you made a choice which allowed you to also have $5 in Cosmetics. If you overspend in clothes, you will have to give up other things in your spending plan which you probably don’t want to do.
As the month goes on, stay within the totals you give yourself for each category,no robbing Peter to pay Paul. And at the end of the month,you will have met your needs and wants, and feel bloody good about yourself. And so you should.
Roll any balances into the next month’s Spending Plan. Consider what you have to pay for and want to buy this next month. Then the same process starts again.
The last big thing you need to do is to track your spending as the month progresses. There are a few different ways to do this. One way is high tech with an Excel spreadsheet. These things are terrific for the arithmetic part. As you spend in any category, record each amount in the Excel spreadsheet and it will subtract for you. The balance is how much you still have left to spend in that category.
Another way, low tech, is to use a little booklet which you can get for a quarter at a Dollar store. At the top of each page, list each category in alphabetical order, one page per category. Then put in the amount you plan to spend beside the title. For example, Clothes $20. Each time you spend something, write down the date, the place you spent the money, and the exact amount you spent. For example, Nov. 15, Winners socks , $8.10. Then subtract $8.10 from the balance of $20 , and you have a new balance of 11.90. That is what you have left to spend in that category.
A third way to track your spending is using just one sheet of paper and recording all your categories in a long table. There is no room to record where you bought the item or the date. Just subtract as you spend. While this is less work than the booklet method, it doesn’t give you a record which you might want to use to compare to your bank statement.
No matter which method you choose, there are two essential keys: subtract as you spend, and add in the money from the next pay period and any funds leftover from last month. While your category for Clothes may have only $11.90 after two weeks, remember that most people get two paychecks a month, and you will be adding another $20. Now, you have $31.90 to spend.
The best thing about the Spending Plan is your balanced life. You are not only paying bills with your earnings, but also planning for things like vacations. When was the last time you had a nice vacation? Even if you only put $1 or 1% into a Vacation category, it is a promise to yourself that you are worth a decent vacation, and you will take one.
The more you plan your money, the more money seems to flow to you. At the very least, you are not frittering it away. You are spreading the wealth to all parts of your life. Now, that’s a command worth obeying!
STOP DEBTING 