LearnHaving a spending plan is about knowing exactly where your money is going so you can feel more in control of your finances and enjoy life without the stress of overspending. Whether you want to plan weekly, monthly, or even annually, following these five steps will help you build a plan you can stick to.
1. List all sources of income
Start by writing down all the income that comes into your household. This includes your salary, your partner’s salary (if applicable), any benefits, pensions, or income from investments. Your total household income, typically on a monthly basis, will give you a clear picture of what you’re working with.
2. List monthly outgoings
Next, write down everything you’re spending each month. A good way to capture this is by reviewing your bank statements to identify direct debits and recurring bills. Break your expenses into two categories:
- Essentials: Rent or mortgage, utilities, groceries, transportation, etc.
- Non-Essentials: Gym memberships, streaming services, and other discretionary spending.
This is a good time to review whether you’re actually using the services you’re paying for and if there are ways to cut back on your monthly bills to free up more money for what matters most.
3. List any other regular expenses
There are often smaller, frequent purchases that don’t always stand out, like grabbing coffee, dining out, or those quick shopping trips. These extras can add up quickly, so review your spending habits and include these costs in your plan. Check your bank statement for these smaller transactions that might have flown under the radar.
4. Add up all your sources of income and expenses
Once you have all your numbers, add up your total income and then your total expenses—separating essentials, non-essentials, and extras to get a clearer breakdown.
5. Subtract your total outgoings from your total income
Now, subtract your total expenses from your total income. Hopefully, you have some money left over, which you can set aside for savings or use for fun spending. If your expenses exceed your income or you’re not saving as much as you’d like, it’s time to revisit your non-essentials and extras to see where you can cut back.
Ask yourself questions like:
- Can you reduce how often you buy coffee or dine out?
- Are you on the best plan for your utilities?
- Are you using all the subscriptions you’re paying for?
- Are there any employer discounts you can take advantage of for groceries or shopping?
- Are you getting the best rate on any loans or credit card debt?
By following these steps, you can create a spending plan that keeps you on track and helps you feel more financially confident!
