27 February 2013

Uncomplicate Your Spending Plan

Finances have a knack for becoming complicated. You want so badly to have a workable Spending Plan, one that is accurate so you are confident that you will be able to live below your means. You add in every little expense you can find and spend hours fine-tuning your income and expenditure columns, adding and subtracting and balancing until the figures dance before your eyes and you have pages and pages of columns and graphs. And you give up in despair because it's just too hard to use.

Stop! You can have a workable and accurate Spending Plan. Making your Spending Plan as simple as possible will allow you to get a better handle on your finances so that you can focus on matters that are more important. Simplifying your Spending Plan can have positive effects on all aspects of your finances by helping you keep everything under control.

Stressing out over your finances is a waste of your time, so rein them in today with a simpler, easier to manage budget.

Follow these strategies to make your Spending Plan easy, workable, and effective:

1. Start with a simple spreadsheet 

Keeping things in a spreadsheet can simplify your budget significantly. Set it up however you like or download our Simple Spending Plan template, it's under "Tools and Guides" on the Printables page. It's easy, uncomplicated and yes, simple. Or you can search for a free template for Excel or Google Docs; just choose something that works for you.

2. Devote 60% to your expenses 

The 60% Solution is a budget strategy that entails fitting your expenses into 60% of your gross income so that you can dedicate the remaining 40% to debt repayment, short-term and long-term savings, giving and fun or entertainment expenses.

3. Devote 10% to giving

Put 10% of your gross income toward your favourite charity, church, school - you decide, but give. If you've never given before it will be hard at first. I am often asked why this is important, especially if you have debt or don't have an Emergency Fund.  Refrain from touching this money for any purpose unless the circumstances are dire.

4. Devote 10% to debt repayment

Use the Payment Push if you have more than one debt to get your debts paid down quickly. This money is for debt repayment, so make sure it is gone as soon as it hits your bank account and you won't be tempted to spend it, or accidentally use it for something else. You can set up a direct debit to your debt accounts easily to make sure your debt money goes to debt.

5. Devote 10% to building your savings

This money is for building your Emergency Fund. Aim for $1,000 to start, then keep on saving until you have at least six months living expenses. When you have that six months of living expenses saved, you can stop saving and add that money to your debt repayment. But once all your debt is cleared, start saving again and aim for at least twelve months of living expenses saved in an easy to access account. Spend this money when you need it, because that is precisely what you're saving it for.

6. Devote 10% to your "fun money" 

Everyone in the family needs to be able to enjoy a treat now and then, or buy something they want that isn't a part of the regular household spending. You can spend this money in any manner that pleases you. This is guilt-free money that you can spend on movies, entertainment, eating out, comic books, junk food or anything else that you wish.

7. Reduce the number of categories you use

This is a biggie, and the thing that over-complicates and over-whelms so many new Cheapskaters. Many budget software programs instruct you to use a million different categories or subcategories. If you want to simplify your budget, use as few as you can. Rather than having a category for every entry, combine some expenses into a larger category to keep it simple. Download our Simple Monthly Spending Plan and use it - it is simple, easy to use and it works!

8. Pay your bills online

Automate your bill payments as much as possible so that you don't have to remember to pay your bills every month. Consider automatic bank withdrawals and pay bills online through automatic debit whenever you can.

9. Automate your savings

Every time your pay is deposited into your account, have a transaction scheduled that will transfer a specific amount into your savings from your checking. Aim to find a high-yield savings account for this purpose.

10. Keep your fun money in cash form

Take out your 10%, keep it in cash, and use it as you see fit. Watching the cash disappear from your wallet can actually teach you a lot about where the money goes.

If you investigate, you'll find plenty of ways to simplify your budget. Do what works well for you and your family. Avoid struggling with a new budget plan because you think it must be better. If it isn't actually helping you budget, then it's not the "better" option for your needs. Sometimes simpler is more effective.

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