How to Create a Monthly Spending Plan

How to write a spending planBenjamin Franklin – “If you fail to plan, you are planning to fail.”

Many people in today’s challenging economy find themselves short at the end of the month, and all too many are forced to make impossible decisions such as choosing between paying rent and buying medication. This is a problem that can be avoided by creating a workable budget.

While this might seem like a daunting task, especially if you aren’t the organized type who normally does budgets‚ it’s easier than you think. You can write your monthly spending plan on paper if you prefer, or use a spreadsheet program. There are even online options like – use whatever method works best or is easiest for you.

Work Out Your Total Income

One key reason to create a budget is to have an accurate picture of your income versus your expenses. The first thing you’ll need to do is record how much income you receive, and how often. This is easy for workers who get a steady paycheck but a bit more challenging for freelancers and the self-employed whose incomes vary. In this case, try to come up with a reasonable estimate.

Calculate Your Expenses

The next step is to write down your expenses. The major expenses most people have include rent or mortgage, car and home insurance, utilities and food. However, don’t overlook other purchases like clothing, personal care items, entertainment and even small purchases like magazines, dining out and other miscellaneous expenses. If you smoke cigarettes and/or consume alcohol, you need to add the costs of these items into your figures as well.

If you are a parent, your children’s expenses need to be listed as well. These include things like clothing, toys, games, school-related costs, extracurricular activity costs (like karate or ballet class) and anything else you purchase for your child.

And don’t forget your pets! Caring for an animal can be expensive. Write down the cost of pet food, treats, toys, grooming, vet visits and anything else you purchase for your pet.

Now that you’ve got a comprehensive list of your expenses, total them and compare to your income. If your income exceeds your expenses, you should use as much of this balance as possible to reduce your debt.

What To Do Next

If your expenses exceed your income, there are a couple things you can do. Step one is to review your expenses and cut out anything that is not deemed essential. Of course, many of these things cannot be eliminated, but you may still be able to find ways to lower the amount you are paying. Are you getting the best rate for your insurance and utilities? Can you find your groceries at a lower price? You will find some highly effective tips for reducing your bills and cost of living on this site.

While this may at first seem a little uncomfortable, it is necessary. You can also brainstorm ways to increase your income. For example, you could take on a part-time job, or turn a hobby into a moneymaking venture.

Consider selling unwanted items on websites like Ebay or Craigslist. How many times are you really going to watch those DVDs? How about that mountain bike that never gets used? Like most of us, you probably have a heap of things around the home that you no longer really need – why not sell them to someone that actually wants them? That extra income will come in handy.

Once you learn to establish a monthly spending plan and stick to it, you’ll find the process becomes easier as times goes on. The fact is, with a smart budget you will be able to decrease your expenses and start to reduce your debt more effectively.