8 steps to creating a spending plan for your money
By Beth Ziehmer
November 14, 2018
You plan out most things in your life, including the classes you need to take in order to graduate, so don't forget to create a plan for spending your money.
Creating a budget can be an intimidating experience, but it is an essential skill. Having a budget to follow can help you make wise financial decisions throughout your life, help you be independent, and accomplish your goals and dreams.
Follow the steps below to help you create a budget:
- Make a list of your values. Write down what matters to you and then put your values in order.
- Set your goals.
- Write down your goals.
- Think about what you want to accomplish financially in the next three months, the next year, and the next three years.
- Determine your income.
- Figure out your income (the amount of your take-home pay from a part-time job or your allowance).
- Do not include overtime pay, because you shouldn't rely on that as regular income.
- Determine your expenses.
- Review your checkbook register and store receipts
- Fixed expenses, such as a car payment, car insurance, cell phone bill, etc.
- Flexible expenses, such as food, clothing, and entertainment, vary from month to month.
- Don't forget about expenses, such as insurance, that is billed quarterly, semi-annually, or yearly.
- Look into personal finance software programs that offer a budgeting feature to help you track these expenses.
- Create your budget.
- Think of your budget as a spending plan, a way to be aware of how much money you have, where it needs to go, and how much, if any, is left over.
- Your budget should meet your needs first, then the wants that you can afford.
- Your expenses should be less than or equal to your total income.
- If your income is not enough to cover your expenses, adjust your budget (and your spending!) by deciding which expenses can be reduced.
- Pay yourself first!
- Be careful with credit cards. Learn more.
- Check back periodically.
- Be sure to review your budget regularly.
- Does the plan still meet your needs and help you achieve your goals? If not, make some adjustments or create a new budget that better meets your needs.
Now that you have reviewed the steps in creating a budget, use Mapping Your Future's budget calculator to apply what you have learned.