CREATE A SPENDING PLAN – PART 3
Our previous two posts had us track our spending and analyze our debt…so now that we have our expenses totaled up, it’s time for the next steps in our spending plan.
- Record & Total Your Sources Of Income
Be sure to include any outside sources of income (self-employment, investments, etc.) and notate both the gross (total) income and net (take-home pay) income. It’s important to know exactly how much we make, but for ease of the budget, we are going to use the net income amount in our spending plan.
- Subtract Expenses From Income
Test the first stage of your spending plan by subtracting your monthly expenses and debt payments from your monthly earnings. If your end result is more income than expenses, you are off to a good start! If your expenses put you in the negative, or if your “excess” income is less than you anticipated (remember, we haven’t factored in extra debt payments or (gasp!) savings yet), this is a good time to:
- Make Adjustments To Your Expenses
Go back over each expense and look for places to make cuts. Some quick ways to cut expenses are: cancel your landline, eat out less often, and downgrade your cable subscription. We will look at more creative ways to cut expenses later on, but for now our top priority is to get our spending plan in place and at minimum, to where we are spending less than we make.
OK, step back, and take a deep breath! You’ve completed the most difficult parts of creating a spending plan! Next time, we’re going to learn how to put our spending plan to work for us, but for now…you’ve got the basics down: how to track your spending, analyze your debt, and make adjustments to your expenses in order to stay afloat.
Are you proud of yourself? You should be!
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