Michael Blue

Level 2 of the Live wedge of the Freedom Target calls for creating and maintaining a detailed spending plan. Level 1 deals mainly with tracking your spending and getting it into a simple bare bones plan. If you want more information on that process, then please refer to this __article[https://www.moneywise.org/moneywise/creating-a-basic-spending-plan-1960](https://www.moneywise.org/moneywise/creating-a-basic-spending-plan-1960))__.

So, you’ve been tracking your spending and are ready to create and maintain a detailed spending plan (also known as a budget - but nobody likes that word, so let’s call it a spending plan).

> Now that you've done the hard part
> 
> IT'S TIME TO FINISH WHAT YOU HAVE STARTED

Admittedly though, this is where most people get stuck. So, let’s walk you through what to do next.

Before getting to the how, let’s remind ourselves why we’re doing this. As a steward of God’s resources, we should have a plan for our money. If we don’t control money, it will control us. Proverbs 27 tells us to, “Know well the condition of your flocks, and give attention to your herds… the lambs will provide your clothing, and the goats the price of a field. There will be enough goats’ milk for your food, for the food of your household.” Quite simply, we need to know what we have, where it is located, and how we are using it. This is what it means to be a steward. Not knowing is not an option. 

Now that we’ve reminded ourselves why we are creating a budget, let’s walk through the basics of how to do it. There are a number of options to choose from: web based, app based, Excel based, pencil and paper, and even simple envelopes. The key is to choose the right system that is going to be best for you and give you the right information at the right time. A spending plan isn’t a set it and forget it practice, it is a regularly monitored one. Without monitoring your spending plan and how you’re doing, the spending plan is really worthless.  If you don’t know where to start, we would encourage you to start with the MoneyWise app - where you can easily create a spending plan from either your computer or mobile device.

### Now that you have determined where you will create your spending plan, here are the steps to creating one:

1. Take the expenses that you tracked and categorized in Level 1 and calculate how much you spend on average in each category each month.
2. Determine which expenses are mandatory and which are discretionary. We recommend making all of your saving, giving, debt repayment, and taxes mandatory. You may choose to have other mandatory expenses, but these are a good starting point. A mandatory expense simply means that it is something that must come out each month and is the very last place you would ever look to cut back.
3. Calculate how much of you have available each month to fund your non-mandatory expenses. To do this, subtract your mandatory expenses from your income. We actually recommend setting up your spending plan with your income listed first, then subtracting out all your mandatory expenses and having a line that shows how much money you have left for discretionary spending. 
4. If you don’t have enough income to cover all of your expenses, you need to begin to make adjustments in places where you think you can cut back. Modify your spending plan until you have assigned every dollar of your income to an expense. Remember, if you end up with a negative number you need to make more adjustments until your income minus expenses equals zero.
5. Monitor your spending plan regularly throughout each month. Identify where you are overspending and where you are underspending. Try to anticipate if you will end the month having spent more than you make or less than you make. 
6. Make necessary adjustments along the way each month.
7. Look back over the previous month and reset your spending plan for the upcoming month. What needs to change? What needs to stay the same?
8. Celebrate little successes along the way. 

> ​The key in being successful with a budget
> 
> MONITOR IT REGULARLY

If you stick it in a drawer, it’s of no value. As a result, you need to find a system that works for you and easily provides you with information. Smartphone apps like the MoneyWise app are great. It will also automatically download transactions and even “smart” file them for you, if you like to your spending categories. Or, a more tactile approach of using physical envelopes for truly discretionary items can be a great solution as well. The key is to identify when you are low on funds in a particular category before it happens so you can make adjustments rather than waiting until the end of the month and trying to clean up your mess. 

Budgeting isn’t the most fun exercise, but it can become fairly easy to manage. Once you have done the hard work of figuring out your system and how you will monitor it, making adjustments is easy. 

Good luck!!

FaithFi

Articles

How to create a detailed spending plan that helps you plan and manage

SPENDING | Jun 21, 2021

Creating a Detailed Spending Plan

By: Michael Blue

Where Faith Meets Finance

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