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Create a spending plan to take control of your finances

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When you hear the word, “budget,” what does it mean to you? For many, it’s a hard-and-fast plan to reign in your spending, plot everything on a spreadsheet and consign yourself to counting pennies and not having much fun on the road to financial wellness. But there is another way — instead of a budget, create a “spending plan” for yourself.

It even sounds better, doesn’t it? More positive.

A spending plan is simply a guide you create to pay for your expenses first and spend money the way you want to spend it. A good spending plan can help prevent those “spending leaks,” or spending money without thinking. 

Creating a spending plan also helps you plan for your future expenses, especially those unexpected emergencies like car trouble, urgent care visits, etc.

It’s not a matter of if “something” happens — but being prepared for when “something” happens. COVID-19 is a prime example of the unexpected that has impacted many people financially as well as physically and emotionally. 

READ: 100 LESD students land laptops through local nonprofit, credit union effort

Now more than ever, we need to use a spending plan to make sure we are in the driver’s seat of our finances.

Three easy steps to creating your own spending plan

Step 1: Look at your household income for the month. Confirm exactly how much money you have coming in so you can get a dollar figure.

For many people, a paycheck is their main source of income. For others, their income might come from unemployment, government benefits, Social Security, etc.

Whatever your source of income, you want to document it and be sure to put a dollar amount for each, especially for the benefits.

Step 2: Write down your monthly expenses. Begin with the bills that are easiest for you to identify, for example, shelter, transportation, insurance, loans, internet, utilities, savings, and food, etc.

To calculate a dollar amount for food, review past grocery bills for the last two or three months to get an average. 

We know that emergencies will happen, so make sure to treat your savings like a bill.  It cannot be an afterthought, so the easiest way to save is to automate it.

Don’t let the money touch your hands; set up monthly transfers or direct deposit. Think of it as paying yourself first.

Once you have identified your bills, make sure there is a dollar amount next to each item and add them up to get a grand total.

Step 3: Subtract your bills from your monthly income total. It is important to always do the math. What we don’t want is to simply have a laundry list of bills and expenses without totals.

Using this total, you’ll be able to clearly see how much money you have left to spend on other items, your discretionary and miscellaneous spending. Yes, it can be hard to look, but you’ll feel more in control and you’ll make better choices when you know exactly how much you have.

As you are using your miscellaneous funds, make sure to track all transactions. It is easy to lose track of where you are financially, especially when using a debit card.

If your numbers don’t add up at the end of the month, look for ways to decrease spending by eating out less, finding ways to have fun for free and asking for discounts. Or, look for ways to increase income.

Following the above three steps will help you create a basic spending plan. It’s timeless advice, and it works!

Lastly, make sure to keep in mind that a spending plan is a living, moving, breathing document that can change depending on your financial situation. Remember to be flexible and make changes as needed. Find more tips, ideas and tools at DesertFinancial.com/newsandknowledge.

Editor’s note: Sulie Richardson is the community education program manager at Desert Financial Credit Union and teaches financial wellness courses and webinars. She has worked in the financial industry for more than 35 years.