There are several factors that need to be considered to establish a spending plan that works.
The key to successfully developing a spending plan is to be realistic and focused. Do not set yourself up to fail by setting unrealistic goals. If you do, you will only become discouraged and go back to thinking that is impossible to live by a spending plan and save any money.
Determine your monthly income
List you’re fixed monthly expenses. Fixed expenses stay the same every month, for example, your rent, your telephone bill, your heating bill, or a car payment.
Know your variable expenses. Variable expenses change from month to month, for example, groceries and doctor’s visits.
- Track and plan for large, periodic expenses
- Compare income with expenses
- Set priorities, goals and limits
- Set a savings plan and make it a priority
- Always keep an emergency fund
- Plan ahead for major purchases, thus avoiding impulse decisions
Please note that if you send money to your relatives living in another country on a regular basis you should include this amount in your spending plan. If you send the same amount of money each month (such as $200 per month), add it to your fixed expenses. If you send a different amount of money each month (such as $100 one month, $125 the next), add it to your variable expenses.
Keep in mind that several goods and services-related expenses may be paid only periodically, for example, once, twice, or quarterly per year. Therefore, remember to include at least 1/12th of these annual expenses in your monthly spending plan. (For example: Robert pays his car insurance bill of $580 every six months for a total of $1160 per year. Therefore Robert needs to divide $1160 by 12 [which equals $96.67 per month] to determine his monthly spending plan for his car insurance.)
Finally, before fully developing your spending plan, you will need to calculate your gross monthly income.
