Video:How to Develop a Monthly Spending Guide

Transcript:How to Develop a Monthly Spending Guide

Create a monthly spending plan, and make budget shortages a thing of the past. Here's how:

Steps to Making a Monthly Spending Plan

• 1. First, total your earnings. Calculate how much money you expect to make each month after taxes, but only include income sources that you are certain of.
• 2. Next, assess your monthly expenses. Make a list of all regular monthly expenses, including any money that you spend on eating out, entertainment or hobbies, and any minimum payments that you have to make towards your debt.
• 3. Subtract monthly expenses from earnings. The resulting figure is how much you can expect to have left after covering all regular monthly expenses.
• 4. Subtract any extra expenses. Review your plans for the upcoming month, and make a note of any extra expenses that you are likely to incur. This includes, but is not limited to: scheduled car or home repairs, medical or dental bills, gifts, trips, parties, extra meals out, subscription renewals and holiday-related purchases. Subtract your extra expenses from the figure that you arrived at in the previous step.
• 5. Build in a cushion. Look at how much money you expect to have left after covering all anticipated expenses, and decide if what remains is enough cushion against unexpected expenses (such as car or home repairs, medical bills, or missed work time.) If you’re not sure how much extra to build in, 10 percent is a good rule-of-thumb.
• 6. Rework your budget. If your budget comes out on the negative side, go over your monthly expenses again, and look for places to make cuts. Keep at it until your budget works.
• 7. Invest in yourself. Use any remaining cash to pay down debts or to build up your savings and investments. To allow for adequate planning time, make your spending plan before the start of the month. Don't be afraid to change your spending plan, if circumstances change. No two months are exactly alike, so make a new spending plan each month.

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