Your Spending Plan

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• Track how you use money each month and year.
  
  
• Avoid wasting money.
  
  
• Prepare for unexpected expenses.
  
  
• Save for short-term goals and invest for long-term goals.
  
  

Creating A Plan

• Total your income and subtract your expenses. Gather pay stubs and other income statements, check registers, bank statements, credit card statements or bills and receipts. Divide your annual net income by 12 to determine monthly net income.
  
  
• Use the Budget Work Sheet to record the amounts you plan to spend for the month. Financial planning professionals recommend targeting at least 10 percent to 15 percent of net income for savings and investing.
  
  
• Monitor your spending. Keep written records of your purchases and payments and record the amounts you actually spent for the month.
  
  
• Review your spending plan at least once each month. Compare what you actually spent to the amounts you planned to spend. How well did you do for the month? Did you have extra money (net cash flow) or did you borrow money by using a credit card? Look for areas requiring special attention and reduce or eliminate expenses as needed.
  
  
• Adjust your plan. Adjust expenses to reach your financial goals.
  
  

Improve Your Cash Flow

• Switch to a no-fee checking account.
  
  
• Switch to a low-interest, no annual fee credit card.
  
  
• Switch to a less expensive phone plan.
  
  
• Use a less expensive Internet service provider.
  
  
• Dine out less often.
  
  
• Monitor your entertainment expenses. Cut back on cable channels.
  
  

In addition, you may need to change your spending habits.

• Save for purchases that cannot fit into your budget.
  
  
• Stop charging unless you can pay credit card balances in full each month.
  
  
• Wait for sales and use coupons.
  
  

Once you have learned to monitor your expenses and spend within a monthly budget, you will have money to save and invest. Your budget should be both realistic and flexible. Budgets often fail because they are too rigid. Plan for unexpected, but necessary, expenses such as medical emergencies or vehicle maintenance expense. Review your budget regularly to ensure it meets your changing needs and circumstances.