Tips and wisdom for creating your spending plan
Guiding your finances with a spending plan is an important step in achieving financial freedom. Here's how!
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Hello, I’m Josh Duncan with SCBTV News bringing you this edition of Financial Freedom. The purpose of Financial Freedom is to provide tips to help you achieve financial freedom for personal significance.
Spending money continues to get easier as our world progresses. I can buy almost anything from my phone in the time it takes to watch this short video. Progress is amazing and rapid.
One of the challenges the human race has had since the beginning of time is planning their spending. When you spend more than you make, you reduce, if not eliminate, your opportunity of achieving financial freedom. The freedom of spending becomes the bondage of debt.
A spending plan is a tool to help you set healthy boundaries for your spending. We are all going to spend money. I’m encouraging you to have plan for that spending.
Some of my first financial mistakes a few years out of college included having a new car payment, a mortgage, and starting a master’s degree program. Since I didn’t have a spending plan in place, I ended up taking on debt to supplement my lack of cash flow. The level of stress this created was not worth it.
The basics of a spending plan are understanding your income and how that money will be spent and saved. This is not an exact science but a plan that will flex with life. I am not suggesting you are able to predict how every dollar will be spent over the next year. However, you can create a fairly accurate plan.
Let me share one important tip here. If you are married, each spouse needs to be involved in creating and reviewing the spending plan. The consequences of not taking this approach can be frustration, lack of trust, and long-lasting damage to your relationship.
If you are feeling overwhelmed already and want to stop the video, please wait. With all the innovation today, there are tools to help you create a spending plan. If you are willing to set aside one hour to create your plan, I’m confident you will find value in the process.
Some of the tools available range from pencil and paper to a spreadsheet to online applications. If you like online tools, some of the most popular are Mint, You Need a Budget, Mvelopes, and Quicken. Some of these have a cost to purchase or subscription fee. With these tools you link up accounts for your bank, credit cards, loans, investments and other financial institutions. Then, you will enter your income and expected expenses for each month. The tool will track your actual spending to your plan. This will help you make spending changes, when needed. Remember saving for emergencies and future goals is an important part of your plan.
These tools do not all work the same. Some quick internet searches will help you determine which fits your needs and style. Also, the tools with a cost typically have a free trial period. One benefit my wife and I have found from the online tools is that we each have access when needed.
Once you have your plan established, you’ll want to monitor your actual spending compared to your plan on at least a monthly basis. Here is another area where online tools will help you review your plan during soccer practice or waiting on your flight.
Once you begin to see your overall spending trends, determine where to make changes to your spending, paying off debt and saving toward your goals. You may need to consult books or a professional for additional guidance. Guiding your finances with a spending plan is an important step in achieving financial freedom.
Thank you for joining me for Financial Freedom. I'm Josh Duncan with F5 Financial Planning, helping you achieve financial freedom for personal significance. Please send topics you would like me to cover by clicking here. See you next time.
Photo credit: SCB Video TV Marketing (producers of the video)
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