Make a Spending Plan (2024)

FAQs

Make a Spending Plan? ›

Key Takeaways. The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.

Key Takeaways. The 50-30-20 budget rule states that you should spend up to 50% of your after-tax income on needs and obligations that you must have or must do. The remaining half should dedicate 20% to savings, leaving 30% to be spent on things you want but don't necessarily need.

A spending plan or budget includes:

Goals – money set aside for emergencies, replacing your vehicle, a family trip, medical co-pays, paying off credit card debt, retirement, education, or other future expenses.

Budgeting is vital to achieving your goals. The first step to creating a spending plan is to assess your overall money flow—what's coming in and what's being spent. From that information, you can create a plan that will realistically guide you on your spending practices. Start by following the three procedures below.

What is the $1 rule? The $1 rule is my spin on the age-old cost-per-use idea, specifically calling out a dollar as the benchmark. Before buying an item, figure out how many times you'll use it. If it breaks down to $1 or less per use, I give myself the green light to buy it.

To reach $10,000 in one year, you'll need to save $833.33 each month. To break it down even further, you'll need to save $192.31 each week or $27.40 every day. These smaller chunks are much more realistic and simple to comprehend, making it easier to track your progress.

The 10X Investment Consumption Rule simply states that before you buy any product or service you don't need, you must first make an investment return equal to at least 10X the cost of such product or service.

Understanding the 90/10 Rule

Kiyosaki's 90/10 rule says this: 90% of people earn only 10% of the world's money. The secret to being part of the wealthy minority, he says, lies in positioning yourself to have low income and high expenses.

In the 50/20/30 budget, 50% of your net income should go to your needs, 20% should go to savings, and 30% should go to your wants. If you've read the Essentials of Budgeting, you're already familiar with the idea of wants and needs. This budget recommends a specific balance for your spending on wants and needs.

What is a simple budget plan? ›

A good rule of thumb is that 50% of your budget should go toward fixed expenses, 30% toward variable or flexible spending items, and 20% toward your goals. Make sure you build a smart savings plan into whatever formula you use, especially if you're setting money aside for long-term goals.

There are many tools available to choose from, but here are some examples of free apps and websites: Mint, Good Budget, and Budgetpulse. You can also use an Excel spreadsheet to create and track your spending plan.

A “Spending Plan” is exactly as it says – a plan of what you will be spending each month. There are usually two parts – your “fixed” spending and your “variable” spending. The fixed part is usually the same every month, with things like rent/mortgage payments, grocery bills, insurance, and car payments.

Budgets help address maladaptive financial behavior or areas, such as overspending or spending leakages. However, budgets are restrictive by nature. Spending plans, on the other hand, give freedom and flexibility, an advisor says. Spending plans act as a sort of “reverse budgeting.”

Step 5 – Track

You simply need to track your expenditure versus the budget you have set for yourself to ensure you achieve your goal. This needs to be done at least once a month in order to check your expenditure of the current month and plan for the following month.