5 Steps to Building a Spending Plan

If you feel a little bit (or even a lot) out of control with your finances then one of the best things you can do is build a spending plan

There is a lot talked about budgeting and personal finance and it is sometimes difficult to wade through the mire of advice that is out there, but essentially building a spending plan is actually quite straightforward once you know the steps involved

So just for a minute forget budgeting going forward (though you will need to do that) and consider these five steps

  • Find Your Total Net Income and Write it Down
  • Find Your Total Monthly Expenses – Write it Down
  • Decide on Monthly Savings – Write the Figure Down
  • Figure What is Left to Spend
  • Revise Until Everything Fits Together

Told you it was easy didn’t I?

A well thought-out spending plan is essential for you and your families financial stability.

Without a spending plan, your money is not likely to make it where you want it to end up.

1. Find Your Total Net Income

Your net income is what you bring home financially after taxes and such have been taken off of the money you make each month.

Write this number down. If you have more than one job, be sure to add up all your income.

If you have another income going into the household budget then include that as well

2. Find Your Total Monthly Expenses

This is the most time consuming bit and will need some work

Think of all the money you spend on a monthly basis and write it down (in a spreadsheet if it helps)

Don’t think about budgeting at this point (that will come later) – for now just write everything down

It might be a good idea to go forward from a point in time and write down everything you spend if you are not sure

You will want this to be as complete as possible so think of all your necessities such as mortgage or rent, food, car payments, petrol money, utilities, insurance and other costs of living. It is best if you keep receipts in order to accurately estimate what you need for each area of expenses. If there are areas that may fluctuate, such as utilities, always overestimate what you will need to pay these bills.

Write all these expenses down. Take your time on this as there are many living expenses that do not come easily to memory. You want this to be as comprehensive a list as possible. By being knowledgeable about what it costs to live, you will be able to give yourself a mental check each time you spend money.

3. Decide on What You Want to Save Every Month

Above and beyond your basic necessities, decide what you would like to be able to save on a monthly basis.

This includes payments made to pension schemes, college funds and any “emergency fund” you may want to build up


This is an area you want to be sure not to forget, even though it may not seem as pressing as some things.

After some thought and research decide the amount you want to save, and add this below your list of expenses.

4. Figure Out What Is Left to Spend

When you have completed the above calculations, you are left with your monthly spending amount.

As long as you have accounted for all of your monthly expenses, you will be left with a clear understanding of what you really have to work with.

There are several ways you can go from here.  You could:

Break it down into a weekly spending amount if you desire, in order to avoid being left with no money at the end of the month.

Or categorize it into anticipated spending so that it can be spread out and not used up only for one area.

Any way you choose is fine, and each individual will have their preference.

5. Revise Until Everything Fits

You may decide to go over your plan again and again before you even use it.

Or perhaps you prefer to go ahead and try it out and revise it as time goes on. A little bit of both can be helpful.

Your plan will be used as the basis for the budgets you set and the financial decisions you make going into the future

It will also drive an action plan if the numbers don’t add up – for instance can you earn more money?  Or do you need to spend less?


Take all the time you need to make your spending plan perfect for you and your situation. This is your life, and your plan need not be perfect for anyone but you  and your family.

Creating a workable spending plan does not need to be a complex process and the best approach is (at least initially) not to get bogged down in too much detail.  That can come later if you want to set budgets and determine how much goes into each “pot”

Indeed – with even a short amount of time, you can come up with a plan that could transform your financial life.

So my initial advice is to take a half day out of your busy schedule and build a spending plan for yourself that will serve you well in the years to come.

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