Do you want to plan for financial success? Then you need a plan.
That is the best and only way to make sure you are ready to be financially at peace. Set goals and plan, it couldn’t be any simpler. Now sticking to it is another thing, so I have some great tips to help make sure that all those ‘best-laid plans’ don’t go to waste.

Step One:
Set a goal. What are you trying to achieve? Do you want to pay off some loans, save for college for your kids, or just have some money set aside in case of an emergency? All of those things may require a different strategy so it is important to know WHAT exactly you are hoping to achieve. Write it down somewhere visible so you will always have that little reminder to know it is all worth it.
Step Two:
Create a plan. Now that you know exactly what it is you are saving for, make a plan of action. Going all willy-nilly will never get you the results you want because you will always be tempted to buy that cute sweater or just one more cup of coffee. If you have a plan of attack, you know exactly how much you can spend each day/week/month on any given item. Budgeting may sound like it is a bit of a drag, and it might be to some, but if you want to get ahead it is necessary.
For example, this year my husband and I made it a goal to pay off my student loan which had a balance of nearly $53,000. We were able to have the entire balance paid off by the end of October, a full three months ahead of schedule, simply by sticking to a plan.
Our overall goal is to be completely debt-free by the time I am 40 years old (I’ll be 35 next year). Our current debt includes a 15 yr mortgage that we are three years into (with a good mortgage rate) and two small personal loans. We are also planning a necessary renovation project to replace the roof on our house, which will increase our debt but planning will not set us back from our goal. We are on track to pay everything off a full two years ahead of schedule.
Creating a budget is simple. Just follow these easy steps and you will have your budget ready in no time:
- Calculate your income. Use your net pay, or take home pay. Include tips, supplementary income, side-jobs, investments etc. Record this as a monthly amount.
- Create a list of monthly expenses. Write down every expected expense you would typically have over the course of a month. This includes a mortgage payment, car payments, auto insurance, groceries, utilities, entertainment, dry cleaning, auto insurance, retirement or college savings – essentially everything you spend money on. You can make this easier by saving receipts for a couple of weeks or a month. Knowing your monthly expenditure on groceries or gas (for example) is easier if you have actual amounts versus a rough estimate.
- Break expenses into categories. Mortgage or rent, car payments, cable and/or internet service, trash pickup, credit card payments (for example) can all be listed under fixed expenses, each in their own category. While groceries, gasoline, entertainment, eating out, and gifts can be listed under variable expenses.
- Once you have everything categorized, list your exact expenses in each of those categories. For example: If you pay $300/month car payment, $100/month insurance, $250/month on gas, $50/month on maintenance, and $10/month on fees such as registration, your total Auto budget for the month would be $710/month. If you don’t know the exact amounts you spend, make good estimates. The more accurate you can be, the more likely you are to stick to your plan.
- Total your monthly income and monthly expenses. Once you know exactly what you are taking in versus paying out you will be able to identify areas that need to be changed.
- Look for areas to make adjustments.
- If you are taking in more income than you are spending this will be simple, you can open a no-fee savings account or shift the excess to a retirement account like an IRA. You can also shift the excess toward paying off a credit card bill faster or reducing a loan balance. Look at your goals and identify where you need to shift your money.
- If you are spending more than you are taking in some major changes will need to be made. It may seem difficult at first but once you start seeing that debt being paid off and the idea of financial peace really starts taking hold, you will begin to feel it is worth it in the end.
The first place to look at cutting spending is going to be your variable expenses. Since these expenses aren’t typically essential, you will need to decide what needs to be cut in order to bring you closer to your actual income. You should never be spending more than you are taking in. The goal is to get your income and expenses to total out to zero, including money that goes to savings.- Example: Although our income was already greater than our expenses, my husband and I decided that in order to truly reach our goal we needed to cut some non-essential things like Satellite TV service and his contract cell-phone. We instead opted for streaming services which were 90% lower in cost, and he obtained a pre-paid cell-phone plan that was half the cost of a contract plan.
Cutting these two things saved us nearly $200 a month in expenses, which if you add it up over time is a huge amount toward paying down our debt and reaching our goals. I will be honest, at first, the idea of cutting out the Satellite service had me worried because we were so reliant on catching our shows and using the DVR, but once we finally did it I realized that we should have pulled the trigger a year earlier. Not only was catching those shows non-essential (we could still get them through streaming if we really wanted), but it gave us more family time since we didn’t feel tied to the TV anymore.
- Example: Although our income was already greater than our expenses, my husband and I decided that in order to truly reach our goal we needed to cut some non-essential things like Satellite TV service and his contract cell-phone. We instead opted for streaming services which were 90% lower in cost, and he obtained a pre-paid cell-phone plan that was half the cost of a contract plan.
- Track your budget. You can go low-tech with an old-fashioned ledger, or you can use a computer program like Quicken. Some banking services also offer the ability to track income and expenses for you, making it really easy to stay on top of your budget!
- Review your budget. It is important to review your budget on a regular basis to make sure you are staying on track. You can decide if this needs to be done weekly, semi-weekly, or monthly. You know yourself, decide how much you think you can be relied on to stick to your budget as that might be the deciding factor. I typically review my budget monthly, however, some may need to do so more often to ensure excess expenditures aren’t sneaking in.
- When reviewing, take a minute to sit down and compare the actual expenses versus what you had created in the budget. This will show you where you did well and where you may need to improve.
Helpful tips to ensure you stay on track
Once you have identified goals, created a plan, and have your budget ready to go, the hardest part is actually sticking to it. Sure those cute heels might look amazing on you but does it fit into your financial plan, will you feel guilty after purchasing, or will it set you back from achieving your goal?
Keep these tips in mind as you think about adding discretionary spending to your budget:
- When considering the amount of money you can live on and setting your budget, don’t include dollars that you can’t be sure you’ll receive, such as year-end bonuses, credit card rewards, tax refunds or investment gains.
- If you receive raises, promotions, and other income increases, don’t start spending for luxuries until you’re sure that you’re staying ahead of inflation. It’s better to use those income increases as an excuse to save more.
- There are occasional pay-periods where you may make some extra money (if you get paid bi-weekly this typically happens about twice a year), and when that happens there is a surplus! While it is up to you on how to use that surplus, I like to use the additional money to help get me to my goal faster. You could also let it sit in your bank account as an emergency fund.
- You’ve come up with an excellent plan, but then the car breaks down or the furnace goes out and the plan goes out the window. This is why you should be sure to include an ‘emergency fund‘ category in your budget, even if it is as little as $10 a month. This will ensure that if an emergency does happen you won’t be blowing the budget you have been working so hard to maintain.
- Make sure to only use the money set aside in the emergency fund for an actual emergency, don’t be fooled into thinking you can spend that money for a luxury item and then replace it over time. If an emergency does happen after you’ve depleted the account, you will not only blow your budget, but will most likely be worse off. If you do use the emergency fund money for an emergency, don’t forget to budget for putting that money back in!
- Include a category in your budget for extra expenses. You can call it your fun money, your ‘blow’ money, or whatever you like. I’ve found that if you are never allowed to buy anything that peaks your interest, you are more likely to fail. Having just a little money set aside each month to spend on anything you like takes that temptation away. Just be sure to stick to the amount you set, while splurging on a $50 pair of shoes might fit into your budget, buying a $500 set of club clubs is probably out of the question until you have your income/expense ratio at a better place.
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