CAN’T KEEP A BUDGET? DRAW A SPENDING PLAN INSTEAD.

Based on one of my previous articles titled Make your personal budget, I have received some feedback on how sticking to a budget may not be as easy as it sounds. I do agree that making a budget is not easy, and sticking to one probably involves the same self-discipline required to lose weight. This doesn’t mean it is impossible, but it is more strategic and there is no one-size-fits-all method.

There are many ways to achieve your financial goal. One of the methods that can be used to manage expenses, is a SPENDING PLAN.

We can get carried away and allow everyday purchases or obligations to get in the way of planning our desired financial future, however, a spending plan is an easier way to see where your money goes and how you can make adjustments. Necessary expenses, which does not fit into your budget may come up. However, recording what you spend on from one period to another helps you get a clearer picture about where you can make better money decisions and you can learn your spending pattern.

Does this sound scary? Trust me, it’s really simple actually: You write down how much money you have coming in, during an average month and decide how you are going to spend it. I am sure a lot of us do this already, but while many people are familiar with the sources of their income e.g. a month salary, a few people can tell the patterns associated with where that income is spent. The right spending plan helps you set aside enough to pay your bills, emergencies, pay debts off and have a little surplus each month or period. This is a different take on a traditional budget.

To create a spending plan, you can follow these steps:

Step One: Write down the actual income for a particular month. Put into consideration, your expected income for the month may differ from your actual income (especially for monthly salary earners, I think).  

Step Two: List and categorize your Expenses - Fixed expenses, Variable expenses and Wants (I explained these in my previous article here) 

Step Three: Set Spending Priorities and allocate money in the order of priorities.

Step Four: At month end, report all expenses made for the month and compare with the spending priorities you set, to see your level of variance. This is necessary for tracking so as to set a more realistic financial goal after two months.

Step Five: Make subsequent adjustments based on your track record.

Finally, it is important that you keep an accurate and detailed account of each category of spending, like food, school fees or school related payments, loan repayment or social activities. In accurately tracking your spending patterns for a month or two, it is likely possible to make realistic financial goals, when it comes to implementing a spending plan.

And after a while, sticking to your personal budget may not be so difficult after all.

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