A spending plan gives you control. Your plan will clearly show how much money you have coming in, what you’re spending it on and where you can make trade-offs to come up with extra cash. It’s also your first step in meeting larger financial goals. With a spending plan in place you will be better able to find the money you’ll need to reach them.

How I create a spending plan

1. First I listed all of my money that I have incoming.
2. I then listed all of my fixed monthly expenses.
3. For the variable monthly expenses (like utilities or any bill that changes each month) I used the average of 12 months of these bills.
4. For expenses that occur less frequently, for example my water bill is due quarterly, I took the cost of the expense and  divided by the number of months till the expense is due.
5. I then listed my other financial priorities, such as building up an emergency fund, paying off credit card debt and saving for retirement or college.
6. Once I have all of my categories set up, I assign my income to an expense. I make sure that I give all my income an expense or a priority.
7. I review and update this plan monthly.