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4 Steps to Develop Your Spending Plan

Two teenage friends making a purchase at a cafe using a phone

Let’s talk about creating a spending plan! Yes, I know, the idea of budgeting might sound about as fun as watching paint dry, but trust us, having a plan for your money can make a huge difference. We’ll break it down and make it super simple.

1. Know Your Income

First off, know your income. Whether it’s from a part-time job, allowance, side gig, or any other source, understanding how much money you have to work with is the crucial first step. Make sure to also consider the consistency. You don’t want to rely on overtime that isn’t guaranteed to cover your high priority expenses like rent and groceries. When developing your spending plan, consider using the 50/30/20 rule as a guideline: allocate 50% of your income towards needs, 30% towards wants, and 20% toward savings and debt repayment. This rule provides a balanced approach to managing your finances and ensures you’re setting aside money for both short-term enjoyment and long-term financial security. Now that you know where your money is currently going and you’ve prioritized what you’d like it to be going to, it’s time to develop the rest of the plan to make it happen.

2. Track Your Spending

Next, track your spending. We’re talking about keeping tabs on every dollar you spend. It might sound tedious, but it’s eye-opening to see where your money is actually going. You can’t accurately create a plan if you don’t know what you’re working with. Are you spending a lot on things you don’t really need? Categorize your expenses into the same buckets you used to prioritize: needs, wants, and savings/debt repayment. Are there “wants” expenses that you can cut back on to reallocate to needs or savings/debt repayment? Be honest with yourself, but also realistic.

3. Set Some Goals

Once you’ve got a handle on your spending habits, it’s time to set some goals. Having clear goals, like building an emergency fund, saving for a vacation, or contributing to retirement, can help you stay focused and motivated. Now, let’s create your spending plan. Start by allocating a certain amount of money to different categories like food, entertainment, savings, and so on. Leave some wiggle room for unexpected expenses, and don’t forget to review and adjust your spending plan regularly.

4. Stick to the Plan

Finally, stick to your plan! It’s easier said than done, but trust, it’s worth it. Keep track of your spending, adjust your plan as needed, and watch your financial goals become a reality.

Remember, developing a spending plan isn’t about restricting yourself- it’s about taking control of your money and making it work for you. So what are you waiting for? Let’s get planning! Need a little more guidance? Check out our Financial Wellness resources to see what other tools we have to offer.