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Create your initial spend plan

After you have determined your cash flow, briefly analyzed the results, and identified monthly target amounts for each of your expense categories, it is now time to create your first spend plan. In this section, you will:

  • Print or prepare a monthly planning worksheet
  • Enter weekly amounts for each expense category
  • Include income in the appropriate columns
  • Verify that expenses don't exceed income
  • Implement the plan
  • Continue to monitor your cash flow and adjust your plan accordingly

For your convenience, we have provided a one-month planning worksheet based on our expense categories. Select the version below that you would like to work with:

These planners have a column for a budgeted total amount per category, and then weekly columns.  Enter your total amount for each category for the month, and then break this amount down into appropriate weekly amounts. In some cases, such as groceries, you might divide the total amount by four so that each week is the same. Or, if you get paid every two weeks, then you might allocate more on payday weeks for groceries. You decide how to allocate the weekly amounts but make sure they don't exceed the total monthly amount.

If you prefer to use your own categories, grab another piece of paper and list your categories of expenses down the left side of the page (same categories you used in the previous section). Use as many sheets as you need to list all of the categories. These will be your planning worksheets.

  • If you are using your own sheets, add six columns to each sheet. Label the first of these columns "Total". Label the next five to indicate the weeks of the month, e.g., "Week1", "Week2", etc. The fifth week will be used for the remaining days of the month. If you prefer, you can enter actual dates in each of the columns, such as 1-7 June.
  • In the "Total" column of the worksheet, enter the total monthly allocation for each category based on the decisions you made in the last section.
  • In each of the weekly columns, enter the amount that you are going to spend in each category for that week, or when you will pay the bill. For example, if your rent is due on the 30th, then you will list this payment in column "Week5". For groceries, if you shop every week, divide your monthly amount into weekly amounts and enter them accordingly.
  • Add up all the projected weekly expenses and enter the total into a "Total Expenses" category at the bottom of each column. If you are using your own sheet, you will need to add a row for this category.
  • Enter your income in the appropriate rows based on when you expect to be paid. If you are using your own sheet, add at least one new row for your "Income" category.
  • Now subtract your Total Expenses for Week1 from your Income for Week1 and place the answer in the "Result" category or row. If you are using your own worksheet, add a row for this result.
  • Check your "Result" to ensure that you have money left over the week. If you don't, you need to redo this plan (spend less in some categories) until you have a surplus. Now repeat this process for each of the remaining weeks.
  • In each week, you should have a surplus. If you don't, then you need to be sure that the previous surpluses are enough to make up the difference. If not, you need to adjust your spend plan so that you can pay your bills when they are due.

When you believe that you have a workable plan, then it's time to commit to following it. Use your earlier worksheets (or other tracking method) to track your expenditures week by week and then compare the totals to the amount you have allocated for that week on your plan. This is to make sure that you are not exceeding your planned amount for each category. For example, using your receipts (or online account reports), you determine you spent $100 on groceries for Week 1. Now compare that amount to your target amount in that category for that week and see how you did. If you had allocated $100 or more for the week, great! If you allocated less than $100, you now need to adjust your plan. Either spend less in that same category the following week, or lower your target amount for another category.

If you are like many people today, the widespread use of ATM machines, credit and debit cards makes it all too easy to overspend. A solution to this is to use cash for everything except your fixed payments, such as rent/mortgage, car loans, etc. Many people review their plan for each category, and place the appropriate amount of cash for the week or the pay period into an envelope for each category. Whenever they need to spend, they only use this cash. If they run out of cash, then they are done until the next pay period when they reload the envelope. This approach not only enforces discipline, but spending cash and watching the pile dwindle as you spend it forces you to evaluate the necessity of every purchase.

The key to this last step is to carefully track your expenses week by week and monitor your progress according to your spending plan. If you do this faithfully for the entire month, and manage to successfully stick to this plan, you will now be ready to prepare a detailed spending plan.

Next section - Create a detailed spending plan

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