One of the key factors in accessing financial health is the day-to-day management of your finances. If you’d rather have your teeth pulled than create a budget, consider reframing the word “budget” to “spending plan.” Reframing the language of money and the story you are telling about it may help alleviate some of the resistance and triggered responses to taking action.
A spending plan is a way of assessing your income and expenses and assigning each dollar into a specific category. A spending plan can flex and expand or change over time to reflect the current state of your finances. Think of it as a game, instead of the rigidly held notion of a budget that is inflexible. Play with finding ways to save money in one area of your spending plan to allow you to have more in others or to cover an extra expense.
The first step to creating a spending plan is calculating your income. Look at all the ways money flows into your life, be it your employment paycheck, money from self-employment or a side gig, alimony, child support, social security, pension, etc. Also, count things like rebates and tax returns as part of your overall income for the purposes of your plan. Make a note of how this money comes in – do you receive it weekly, monthly, or once a year?
Next, begin compiling your expenses in three categories:
Monthly – Expenses that happen every month like your rent or mortgage, utilities, groceries, car payment, gasoline, dues on memberships, child care, emergency savings fund, paycheck deductions like social security, retirement savings, health insurance and taxes.
Periodic – Expenses that happen once or several times a year, like annual memberships, insurance premiums, auto tabs and other licenses, tuition, donations, tax savings, holidays and travel.
Debt – Expenses that are related to an installment on the “loan” of capital, be it credit cards, auto payments, student loans, mortgage, etc.
Note that some of your installment payments on debt are also monthly expenses – for this exercise, only count the payment once on your spending plan, however, do know the terms of the loan, including interest rate, payoff date and total loan amount for future debt reduction planning.
To help you get started on creating a spending plan, here are just two of the many programs with online sites and smart device apps that can go a long way toward getting you organized:
You Need a Budget (YNAB) – This program takes an intentional approach to being clear about what you want from your money and encourages you to assign a job to every dollar before you get it. You can create a spending plan and track your income and expenses online or on your smartphone or tablet. YNAB is free for 34 days, after which the annual fee is $50.
Learnvest – This program helps you create a customizable spending plan and set goals, including dealing with credit card debt, emergency and retirement savings. You can view your progress, get expert help and track your spending. Learnvest has a free version and a premium version for $299 annually, plus $19 a month ongoing support. It can also be accessed online or on your smartphone or tablet.
*Check out other articles in this series “Better Money Management for Better Health” for tools to help you create your own path toward financial wellness.
By Alana Karran