A spending plan does not prevent you from getting what you want; it helps you save to get what you want. The most important thing in using your money wisely is not how much money you make, but how you use it!
1. Arrange a family system for handling money and make certain that everyone in the family understands it.
2. Make your own spending plan suited to your own income, your own needs, your own wishes. Don’t try to follow others…your own spending plan is the only one that will help you.
3. Decide what your family’s most important goals are. Your money should be spent for those things that mean the most to your family’s welfare and happiness. and not spent on the things that mean the least to you and your family.
4. Plan ahead for the whole year…this way you can have a true picture of where you are going and how well you are doing.
5. Include all your income and all your expenses. It’s usually easy for families to determine their income; getting a grasp on expenses is much harder. GreenPath’s website has a form for determining your expenses. In the first column – you may choose either weekly or monthly – write down what you think you spend in either the weekly or monthly column on each category of expense. If you pick weekly, multiply it times 4 and enter the figure in the monthly column. If a bill comes once a year (annually) – divide it by 12; if it’s paid quarterly – divide it by 4; and enter the amount in the monthly column.
For the next four pay periods, write what you actually spend. Keeping receipts will help you track what you spend more accurately. The final column, “Adjustments,” allows your family and you to determine what is reasonable to spend and save based on your findings.
6. Bring the entire family into the plan. If family members understand the family goals, they will work harder to accomplish them.
7. Pay yourself first by trying to save 10% of your income. If you can’t afford 10% then start smaller, but do it regularly. If you treat it as a bill, you’ll be more successful; that’s why savings is included in the expenses on the bottom of GreenPath’s budget sheet.
8. Stick to your plan but don’t be afraid to alter your program if you think it needs improvement. If at the beginning you fail to stick to your budget, don’t give up – stay with it. You will succeed if you are determined.
9. Review your plan once a month.
10. Hold family meetings to review the progress together.
There’s no right way or wrong way to do a budget. You have to tweak the process to find what works for you. Don’t be discouraged if it seems to take a while to find out what works. Setting up a budget can be time consuming, but once it’s up and running it doesn’t take much effort to keep yourself on the right path.
Overestimating the expenses can be a good way to build some “wiggle room” into your budget to avoid running into deficit situations when unexpected expenses arise. You ALWAYS want to include some sort of savings in the budget- that way you have cash to fall back on rather than having to use high interest rate credit cards in emergencies.
GreenPath is a non-profit credit counseling agency with offices in 7 states, with an office in Marquette for 20 years. Stuart Baker is a Certified Consumer Credit Counselor with over 15 years counseling and banking experience. All appointments are confidential and at no charge.
Excerpted with permission from the Spring 2010 issue of Health & Happiness U.P. Magazine. Copyright 2010, Intuitive Learning Creations. All rights reserved.