New Tips for a Spending Plan, Not a Budget

Creating and sticking to a budget is an arduous task for many people, and one that puts them off saving money or paying off debt more quickly. That’s why I like the Wall Street Journal’s recent approach to not planning a budget but instead creating a spending plan. Some of the key tips to having a workable spending plan are:

• Start by calculating your fixed monthly costs - rent or mortgage payments, household bills, cell phone plans, transport costs like fuel or bus tickets, insurance and groceries. These are things that rarely change from month to month.
• Subtract this amount from your salary or other income, and the amount you’re left with is the amount that you actually have a real “choice” about spending, and it’s here where you need a good spending plan.
• Before each new month begins, make a list of the things you would like to buy with this money. Some might be more necessary than others, for example clothes to wear to work may have a higher priority than a new video game - try to list them in this order.
• Including “savings” as the top priority for this money, and aim to make it around 10% of your income if possible; if not, start lower and review this regularly to increase it.
• Then plan which of the other items on your list you will be able to afford this month. If unexpected expenses arise, try to find the money by deleting one of these items or postponing its purchase until the following month.