Instead, create a spending plan. The key here is to know that a spending plan gives you choices. Nothing is off limits. Determine what is important to you and plan to make sure that you have the funds to accomplish that. A good spending plan is all about prioritizing.
What holds more meaning to you? Is it to be able to go out to eat 3x times a week or to have those same funds to purchase name-brand, top-of-the-line shoes? Is it to be able to do a weekend getaway once a month or to update the kitchen in your house? Is free time to be home more important or would you consider taking on a part-time job if it gave you the extra to be able to join the local golf club or plan an annual girls’ weekend. If you want to a $5 daily cup of coffee from your local coffee house, you can plan that expense. If you want to plan an international 2 week vacation every year, you can plan for that.
A spending plan is all about determining the priorities for you or for you and your partner if in a committed relationship. If you have children, even elementary age, they should also have a say in determining priorities. You may have to limit them to choosing option A or option B. Giving them complete freedom of choice may not be realistic – you do not want them to plan a Disney vacation when what you are willing to spend is limiting you to one of two local amusement parks. Giving them a choice between two acceptable options allows them to be involved with limitations.
Creating an initial spending plan is relatively easy. The fine tuning to really get what you want can mean some major changes to your lifestyle. This may take some time to get used to it if you need to change your living arrangement and/or you need to get yourself out of debt.
The first step is determining where you are spending your money now. Either on paper or on your computer using Excel, you want to start a list of how you are currently spending your money. More details to follow in future posts.