Updated: Jun 8
Budgeting is something that fills most with dread. Most people who make budgets don’t stay within them. They are a constrictive process that holds you back from choice. What if I told you there was another way to manage your money?
I’ve been asked by several who are now taking on life on their own, through divorce or death. They are just now starting to handle their budgets, when they previously had their partner doing so. They needed advice on the next steps. I’m hoping that this may be a guide to help them manage their financial lives.
I’m guessing you are reading this because you need to find some control in your financial world. Some guides will tell you – spend on this, but not on this. They try to make strict rules for spending, which when you go outside of those – leave you feeling like failure. No one but you (and your family) has to live with how you spend your money, so no one but you and your family can control how it is spent. Each of our spending can vary depending on what happens in our lives and what is important to us. There will almost always be something that comes up and is not able to be planned for. Knowing how you will handle those things financially is key to this plan. Each month’s spending is like a snowflake. They might look similar, but they will have their differences. That is the difference between Budget and Spending Plan. The Spending Plan focuses on the overall pattern, but realizes that each month will be unique. Identifying the overall pattern is how you will take control over the finances. Accepting that exceptions will happen and then developing a plan for how you will accommodate those changes is the key.
Hopefully this guide will help you to be able to take control of your financial future. This guide is broken into steps. These will help you in the creating of the overall spending plan. Your end spending plan might be in a journal, a spreadsheet on your computer, or an app. Either way, it will need to be convenient to use and readily accessible. If it is inconvenient or too cumbersome, you will more likely stop using. Find the method that works for you.
First what is the difference between a budget and a spending plan? Budget is where you set strict guidelines for how you will spend your money. You feel punished if you go outside of those rules. A Spending plan is where you adjust your spending with a give and take over time. You plan how you will spend your money, but it leaves room for alternatives.
What you Need:
There are several options that work with what you feel comfortable. There is no right way. There is only the way that you will keep up with. Listed below are a few options.
- Journal Method. Buy a pre-made Spending journal or Create your own
- Cloud based or Computer Based Spreadsheet
- App Designed for Spend Plans
Links to items provided may provide benefit to this website.
Links that might help:
Link to Apps:
Article on Selection of Personal Finance Apps -
Income can come in many forms. Knowing how to account for them is key.
Regular or Salary Income
Probably the simplest to enter. This is the income that no matter what the amount does not change. The key is to focus only on your Net Income (after taxes, insurances, benefits, etc). This is your spendable income. Most people only have one Salary, but others have additional regular monthly payments, such as Child support, Alimony, Trusts, etc. If you can count on this amount coming in on a regular basis, enter the amount here.
I strongly believe (and follow) a spending plan instead of a budget. I have too many surprise expenses that was making me have to redo my budget. I now start each year planning how I'm planning to spend my money for the year, leaving unallocated also - estimate high using what I spent last year as my start less some (I'll order less) goals. I then readjust at the start of each month. As a new expense comes up that I hadn't planned for, the money has to come from somewhere else in the Budget. Then you don't feel guilty about buying that thing, if you need to and see things more like tradeoffs. I'll stop buying coffee, so that bill goes down, so that I can buy the surround sound I wanted.
Do you get a bonus or annual increase? Plan for this. Need a better job, here are some resources to help with that.
Check out our articles on How to get experience or How to land that next job.
Hourly Income planning can be tough. A good number of hourly people do not have vacation time and if they don’t have hours, they don’t get paid. You generally know your hourly rate. This is generally paid on an every other week basis, but this is your Gross income. To determine your take home income, take your check and divide by the number of hours you actually worked. That is your Net/Take Home Income.
Step 1 - Determine how many hours you can expect to work.
I really like this website. It does a good job of determining hours and you can adjust based on additional vacations, etc.
Step 2 - Once you know how many hours you will actually expect, you then plan out how much to expect and when. You will take this and add it to your Spend Plan. You will repeat this for each job.
Repeat for each job.
Sales, Commission, or Irregular Income
This can take the form of Income Tax Returns, Anticipated Gifts, Self-Employment, etc.
The key to success here is to identify what your nut to crack for the month is and make a plan to make that, also look to the future months, to make sure you will have enough to cover when there are anticipated slow times. Ex. Builders can expect that cold weather will affect their projects in the snowy months. Vacation resorts can expect slowdowns at various times of the year.
Use your history, previous, knowledge of your current projects and known plans to records to identify what is reasonable by month, week, etc. Try to think through the entire year. Review your bank statements. For each not regularly scheduled deposit, is this an amount that you can expect again and do you think it will be the same or similar?
This is only the First step in the Spending Plan process
Once all of the Income is together, you can move on to Expenses. We will gather the information, review for adjustments, and build the plan. If you find that you need a little more income, there are several great articles and resources on how to build an additional income.
Next Article will be focused on Spending Habits and How to put it all together.
I look forward to helping you through this journey. If you have questions, please reach out, I'm happy to share and assist. If you have suggestions for improvement - those are appreciated as well.
Brandy Over 40 is a midlife blog covering everything from travel and health to self-improvement
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