Setting up and maintaining a household and personal spending plan is extremely important and especially so in these times of basic costs of living on the rise.
Now many of us have our own way of doing things and setting up a spending plan is the same, as long as you have one and it works for you, that’s great. But I thought I would share a simple plan I use with many of my clients. The plan is in three (3) steps and is quite easy to do.
Step one involves a person or household tracking all of their expenditures for a couple of months, maybe a few months.
This basically means writing down and tracking, putting pen to paper of all the expenditures one has for a month on a daily basis; sounds easy and difficult all at the same time. But by doing this, you are getting a visual of where all your money is going and you may see or note some areas that can be adjusted or changed.
An example is a client of mine whose was spending a few Pounds each day at a vending machine for crisps. He tracked this and saw that he was spending on average £15 a week, which added up to £780 a year! That shook him up a bit, so his decision was to reduce this expenditure and try to save £500 a year to pay towards his debts. It wasn’t about depriving himself, but now he was aware. The tracking made him aware.
So if you are honest in your tracking your expenditures, it is a very real, concrete thing to see. So in essence the tracking becomes a concrete tool to effect a change in your behaviour with your money. Now that’s a lot to write, let alone say to someone.
This step is where we review all our expenditures and look at what it is going to cost us to live for a month.
Which means we sit down at the beginning of a month and write out all the expenditures we know we will incur this month, rent/mortgage, council, petrol and all the other things we have seen we are spending money on based upon our tracking.
We also then, write down what we feel our wages or household income will be for that month. For many of us this is easy to know as we are salaried or work the same hours each week and month.
Next is to see how we fair between the two, income and expenditures. Is there enough income, are we experiencing a deficit, and have we in the past been making up that deficit with credit? Or are we showing a surplus, a surplus is always good.
The last part of this step is to live our life, live out the month tracking our daily expenses as we had prior.
This is bringing it all together, the pre-planning, the living of our month, and the afterwards of next month.
At the end of the month we review what we have tracked and look to see how it compares with what we had predicted the month to be like. We need to look at any changes in expenditures, did we spend more in one area than we had thought we would, why was that, can we even figure out why? Did we have expenditures arise that we did not know of or forgot to list at the beginning of the month? This can bring up quite a few issues and questions.
This will also allow you the opportunity to adjust or hone the next month’s plan to try and be more efficient and knowledgeable of where we are spending money.
Of course this is just a simple version and an overview of one type of spending plan. But I am hoping it gets some of you thinking and looking at where you are spending your money, and then make any needed adjustments you feel are necessary.