If you wonder where the money has gone at the end of the month or wish you had more left over after you pay your major bills, it may be time to create a household spending plan (or revise your current plan). Here’s how:
- Track your expenses. If you are already doing this, good for you! If not, record everything you spend for one month (use whatever method works best for you). Break these expenses down into categories (such as “takeout”) to see where you may be overspending.
- Evaluate your income. Compare your monthly income to your expenses. If you are spending more than you are earning, then it’s time to make some changes.
- Set goals. Make a list of reasons why sticking to your spending plan is important. Do you want to take a dream vacation, buy a house, or simply get out of debt? Make sure your goals align with your values.
- Build your spending plan around your pay schedule. Determine what bills will have to be paid out of each paycheck. Then, make sure to set aside enough money to cover each expense. If you are paid bi-weekly, your spending plan will look different than it would if you were paid monthly.
- Compromise. If you share household expenses with a partner or other loved one, you will likely need to negotiate a plan that works for both parties. Be prepared for some give and take.
- Don’t forget to save. Set aside three to six months’ income for emergencies. Prioritize replenishing this fund whenever you make a withdrawal. In addition, incorporate a regular savings deposit into your spending plan.
- Use tracking tools. If you struggle to keep track of due dates for key payments, consider putting them on your calendar. Setting up automatic payments or using an app to manage your spending may also be helpful.
- Conduct a periodic review. Life changes, and so will your financial situation. Review your spending plan at least once a year or whenever your finances have undergone a major alteration.
