Spending Plan Fundamentals

In a quest for a peace of mind as it relates to one’s finances, inevitably the subject of budget planning comes up. Personally I like to call it a spending plan because the term “budget” has such negative connotations. The last several months we’ve covered a lot of ground as it relates to getting organized. Freeing up your paper clutter is an important step. By now, everything should be filed in a place where you can easily retrieve it.

Before you sit down with a spreadsheet, Quicken budgeting template, or pad of paper, I highly recommend that you take my 7-Day Challenge. This exercise is especially helpful for those who haven’t tracked income and expenses. Follow the four easy steps that should fit into any lifestyle.

Here’s what you’ll need to create a realistic spending plan:

Accurate Income Estimates

You’ll look at all income from all sources.

  • Paystubs
  • Rental property payments
  • Pension or other income statements
  • Business income (P&L reports)

Fixed Costs

These are expenses where you know you’ll be paying regularly, like:  

  • Auto registration
  • Cable, TV, Internet
  • Car Loans
  • Child Care Expenses
  • Insurance (health, home, life, auto)
  • Mortgage payment(s) or rent
  • Property taxes
  • Student loans
  • Utilities
  • any other fixed cost that you pay weekly, bi-weekly, monthly, quarterly, semi-annually or annually

Variable Costs

These are expenses that vary to some degree, and you pay as you use them, like:

  • Food (include groceries as well as dining out)
  • Phone (Landline or cell)
  • Subscriptions (magazines, newspapers)
  • Auto (maintenance, gas)
  • Personal care (hair, nails)
  • Out of pocket medical
  • Entertainment
  • Holidays, birthdays, and other special occasions

If you took the 7-Day Challenge or have been tracking your income and expenses via a financial management program like Quicken, pulling together more accurate numbers will be easy. If not, you’ll need to dig into your bank statements or account files to compile the necessary information. 

Remember, building a realistic spending plan that you can live with takes some time. Involve your spouse or partner in the process, as it should reflect your lifestyle. Knowledge is power, and without an honest accounting of where your money goes each month, achieving goals like dream vacations, a new car, and retirement will be harder to achieve.

Let me know how you fared in your 7-Day Challenge. Was it a piece of cake? What surprises did you experience?

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