How do I make a plan for spending money?

Spending money is easy. Way too easy. Face it, life can be demanding sometimes, and going out and enjoying a nice meal or buying something you've wanted for a long time can relieve some of the stress.

But have you ever spent money and wished you hadn’t? Making a spending plan can help you make sure your money goes where you need it to. Sticking to a spending plan will help you feel good about spending your money. It can include the amounts you want to put toward your financial goals. And, it can include the amounts you want to use to treat yourself once in a while.

To make a spending plan, you need to write down four different things: 1 The total amount of money you receive every month (your income). 2 The total amount you spend every month (your expenses). 3 A comparison of your income and expenses (your cash flow). 4 A plan to change how you spend money so you can meet your financial goals.

Tips for making a spending plan that will get you closer to your financial goals: • Be accurate. Don’t overestimate your income and don’t underestimate your expenses. Make sure to use your spending diary for a least one week. • Don’t forget about bills you pay every few months, such as car insurance. For these types of bills, divide the amount by the number of months between each bill. For example, if you pay $450 for car insurance every six months, divide $450 by six for a monthly amount of $75. In other words, you need to save $75 each month for your car insurance expense. • Utility bills may vary from month to month, so do an average monthly amount. • Make a comparison of your income and expenses (your cash flow). • Determine a plan to change how you spend money so you can meet your financial goals.

See Spending Plan Worksheet >>

Ways to Increase Your Income
•	Look for a better-paying job.
•	Get the training and skills you need.
•	Ask for a raise (and be ready to justify it).
•	Take on a second job.
•	Have other family members contribute to the household income.
•	Turn a hobby into an income.
•	Have a garage sale and sell what you don’t need.

Making Changes
Was there money left over at the end of the month? Congratulations. You can put that toward your financial goals, or start thinking about building an emergency fund or paying down credit card balances.

If you didn’t have money left over, take a closer look at how you spend your money. (Read about spending leaks.) Or, if you’re spending all the money you have every month to pay bills, think of ways to increase your income.

Here are a few saving habits that might be easy for you to form:
•	If you receive money as a gift, save part of it.
•	Save a portion of your paycheck before you pay your bills. Ask you employer if your company offers direct deposit. If so, you can have your paycheck deposited directly into your checking account. You may be able to specify that an amount be automatically deposited into your savings account.
•	Put $1 a day plus any loose change in a cup or jar. By the end of the month, you may have $50 or more.

Paying Yourself First
You may have noticed that one of the expenses on the list is saving. Perhaps you wondered why saving is an expense. The best way to save is to pay yourself first. This means setting money aside in an emergency fund or savings account before you spend it on other things.

Look at it this way: when you first start saving money it's more important to get into the habit of saving than to be immediately concerned with how much you've saved.

The important thing is to set something aside every day if you can, or at least once a week. A dollar, $3, or $5—whatever amount you can set aside will help you meet your financial goals.

Being a Savvy Shopper
The key to becoming a savvy shopper is to learn to replace impulse buying—buying without giving thought to the money spent—with savvy shopping. How do you start becoming a savvy shopper? Stop, look, and listen.

Stop!	Never rush to buy something. You will usually spend more than you need to. Save for your purchases. And quite possibly a sale might come up in the meantime.
Look!	Look for discounts, sales, and coupons—and follow the rule of three. Pick three stores and compare costs to find the best price. If it’s clothing you’re after, compare what you want at three stores to get the best deal. And remember to check the quality of everything you buy. Items that don’t last are no bargain.
Listen!	Ask around for feedback on items you want to buy. Ask a friend if she’s happy with her new designer shoes she “just couldn’t live without.”
Also, find out more about what you’re buying. Ask salespeople these questions: • Is the item under warranty? For how long? • Will the item go on sale soon? • What is the return policy? Will I get a refund or an in-store credit?

Financial fitness tip: If you want to buy something that costs more than $100, wait two days before you buy it. By that time, you might find you don’t want it anymore.

Standing Up to Pressure to Spend

Not only do advertisers pressure us to spend money, sometimes our friends do, too. It might feel uncomfortable at first to say “no” when others are buying things you want or going places you want to go. When this happens, focus on your financial goals and the Habitat for Humanity home you’re working to become qualified for.

Your friends and family will have different goals. If you ever feel pressure to spend, explain your financial goals. Then show how you can stick with them. Your actions may inspire others to do the same.