If you’re someone that wonders why you don’t have any money at the end of each month, it’s probably because you’re spending more than you make.
If you spend less than you make, there’s usually money left over for you to save in case of a rainy day.
So if the issue is too much spending and not enough saving, you would think this to be an easy fix right? Well for most people, saving money can be extremely difficult.
We live in a society where you’re encouraged to spend, and if you don’t have money to spend, you can borrow it.
This is where they offer you a bunch of credit cards just so they can act like they’re helping you with your lack of money issue.
To avoid this trap, it’s important to create a spending plan that helps you develop better spending habits.
So What Is A Spending Plan?
A spending plan is a type of budget that is less restrictive than your typical budget. When people hear the word budget, people tend to automatically get turned off.
Therefore by calling it a spending plan, you don’t get the same rigid rules you would get when dealing with a budget.
That’s because when we fail at an area of our spending, we tend to throw the whole budget out.
But with a spending plan, it is built around the 50/30/20 rule where your spending is broken up into spending needs, wants, and savings.
This is how the rule is broken down:
50% of your income should go towards NEEDS (ESSENTIALS) such as:
- Rent / Mortgage
- Utility bills
- Loan payments
30% of your income goes towards WANTS (PERSONAL)–things you don’t need, but you don’t want to live without like:
- Eating out
- Luxury goods
20% should go towards SAVINGS because it’s important to build up assets and be prepared for rainy days for things like:
- Saving accounts
- Child Savings account
What makes this method much easier to manage as opposed to a budget is how it is used. Instead of using it as a firm rule, you just need to use these percentages as guidelines.
This will allow you to not have to micromanage everything you spend, but rather manage as a whole. I’m sure you’re thinking that this seems like a lot of work still for you to manage.
Well that’s why it’s important to use tools to help you gather all the information into one little graph. One tool in particular is Mint, which I plan on discussing in the next paragraph.
Using The Right Tools
Not only is Mint a great tool to help you manage your budget, but it’s also free to use. Mint does the budgeting for you which then allows you to get a full view of your spending plan.
When using the Mint app, you will notice all the cool features it has when it comes to helping you understand your spending habits.
- The spending is automatically categorized into a line graph that shows how much has been spent compared to how much has been budgeted
- These bar graphs are color-coded based on your rate of spending and if you exceed your budget the bar will turn red
- Each line graph is set to one month, so it’s easy to see whether you are on track to meeting your monthly budget
- Mint will also summarize the total of all your budgeted spending and income
To give you a quick overview of how it works. Mint has a budget sheet that will show you your expected income for the month.
This will let you know how well you’re doing overall. You want to make sure your bars stay green which indicates that you are meeting your budget goals.