In my last post I promised to explain how to create a spending plan, AKA a budget. I like to think of this as a spending plan, because this is something you (and your spouse if married) decide on. As you get more financially free, there should be more discretion in your spending plan.
To develop a spending plan review your checkbook for the last few months and list all your expenses. Try to put them in logical categories for you. If there are a lot of ATM withdrawals or things that you can't remember, you need to track all expenses for 30 days. Write down everything, including the dollar for the diet coke at noon and the 50cents for your child's extra lunch money. If you have ever done Weight Watchers, this is much like keeping track of all the food you eat. It is amazing how many little expenses we may "forget" without this tracking mechanism.
Once you have all of this information, you need to make your Spending Plan. List items by category and total. Make sure and include a monthly amount for those items you pay annually, such as car insurance, car taxes, or home owners insurance. OK, so my expenses are greater than my income? Now what? In the short term, you may need to go on a "beans and rice" diet, as Dave Ramsey calls it. In future posts, I will discuss strategies for reducing expenses. We LOVE finding ways to save money and reduce expenses in the Hudock household! Its fun.
Keep going and keep track of your expenses.
For further information on budgeting ideas, see the resources at www.crown.org. They have some good forms you can use, as well as some sample budgets for various family sizes and income levels that can be used as good guidelines.