Saturday, January 3, 2015
In the beginning of the New Year, in addition to setting "intentions" for the year ( as opposed to goals) I map out a spending plan that takes us through the year. I don't call it a budget as that has a negative tone to it. Rather I decide where we are going to spend our money this year. We all enjoy spending money, right? This is my "money intention" for the year. This has worked for us in such a great way that I wanted to share it. It's a simple plan though it doesn't address all your money issues such as, "how to pay off those nasty credit cards". I'll address those next week.
So here is how I do it:
1) I list monthly expenses such as phone bill, utilities, groceries, gas for the car, etc. I even include categories for gifts, misc, giving, saving, clothing, etc. I do this, allocating all of our income to a category. Even if there is not much left for clothing or gifts I try to allot some money to every category.
2) I list yearly or quarterly or big expenses such as insurance, money for Christmas, vacations, etc. I also include extra household expenses, dental and medical expenses, and others. Anything that I usually need money for but don't pay monthly I put on this list.Then I add these up and divide by 12. Each month I set aside this amount in a savings account to pay these expenses when they become due. That way I don't have to scrounge up more money in the month when these are due.
3) My monthly spending then is the same every month. I do rearrange some of the categories if there is a month where I give more gifts for birthdays. I usually take it from another category such as clothing when I'm not in need of new clothes.
If you would like to try this plan here are a few tips:
In addition to following steps 1-3...
A) You may choose to put some of your categories in the yearly list instead of the monthly list, such as clothing, if you so choose. Do whatever works best for you.
B) Make sure you have a monthly category for "giving" and an "emergency savings account" in addition to your "yearly spending account" even if you don't have much to save for emergencies. When I first started my emergency savings account many many years ago now, I could only afford to put in $25/ month but it made a BIG difference when I knew I had this extra money for emergencies. Dave Ramsey, an expert money manager, suggests first saving $1,000 for emergencies. For more in depth money advice go to daveramsey.com.
C) If it helps you to follow this plan, you can put the money in envelopes for each category. This may help you keep track of what you have left.
Setting up a spending plan can relieve a lot of stress. You have a plan and you now know where your money is going to be spent. Now you just have to follow the plan.
I've completed my spending plan for 2015 and I look forward to putting it into action! I also am happy that it is one less stress that I will have to deal with this year. I'll be sharing more tips on living with less stress in the days to come. I hope you'll join me!