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Make a Spending Plan Not a Budget

Most of us do not have a problem spending money. Budgeting on the other hand… that can be a challenge.

That’s why at Tip Yourself we take a very different approach to budgeting. We call it setting a Spending Plan not a budget.

Just the thought of a budget can make you cringe. Budgets can immediately feel restrictive. A budget is something our parents tell us we need to do.

Let’s shift your mindset. Let’s create a spending plan instead.

Here’s how it works.

You take your monthly income or the money you receive in an average paycheck and you make a plan for how you plan to spend it. Spending money is a lot more fun.

Let’s break down how you’re going to spend your money into three categories. (Next we’ll break down each category in more detail)

1) Fixed Expenses — Money we know we’ll need to spend.

2) Regular Expenses — Money we spend consistently

3) Your Priorities — How we want to spend our money

Here’s how you’re going to make your spending plan. Get a piece of paper or if you’re more of a digital person, create a new note or spreadsheet on your phone or computer.

Let’s start with the first category.

Category 1 — Fixed Expenses

Fixed expenses are things that you know you’ll need to spend every month. This includes rent or mortgage payments, car payments, utilities, student loans as well as cell phone bills. These expenses do not change. They’re a fixed dollar amount each month.

Make a list of each fixed monthly expense and how much you have to spend on each of them. Double check your monthly checking account statement to be sure you’re remembering all of your fixed monthly expenses.

Category 2 — Regular Expenses

Regular expenses are things you commonly spend money on, but they’re not fixed monthly bills like category 1. However, regular expenses are areas where you consistently have to spend money.

It’s money you spend on things you need every month. Getting to work, eating, etc. Some examples are food, gas money or bus fare.

Don’t worry about being exact. This is your spending plan not a fixed budget.

Make a list of each regular expense item and estimate how much money you want or have to spend on each one.

How much do you normally spend on food or coffee? What does it cost to get to work? Write it down in your spending plan.

Category 3 — Your Priorities

Now, this is the fun part of your spending plan. Let’s make a list of the things you want to spend money on. Make a list of your priorities. This can be fun stuff including specific things you know you want to buy.

Don’t worry about the dollar amount. For this category, we’re just making a list of priorities. What’s important to you?

It could be travel or fashion. Maybe you’re a tech geek and like to have the latest iPhone when they come out.

This is also the category where you put priorities like paying off student loan debt, buying a new car, starting a 401k, or paying off credit card debt.

Again, don’t worry about dollar amounts for category 3. This is just a list of priorities. It’s a list of what’s important to you.

Final Step. Add it up $$$$

Ok, now you’ve got your spending plan details written down. It’s time to add it up.

Start with your fixed expenses. Add those all up and get a total of your fixed expenses.

Next, add up your regular expenses. Get a total of your regular monthly spending.

Now compare your monthly income. How much do you normally take home from your paychecks each month? Take that total income and subtract your fixed expenses and your regular expenses.

Your income minus your fixed and regular expenses is the money you will spend on your priorities.

Let’s spend some money!

Pick how much money you want to spend on each of your priorities.

Take your list of spending priorities and put down how much money you want to spend on each one. This is the fun part of your spending plan. Don’t worry about being exact.

How much are you going to spend on paying down debt or saving?
How much are you going to spend on new shoes or clothes?
How much do you want to spend on eating out or going to the movies?
How much do you want to spend on travel fund?
How about a new tattoo?

This is your money. It’s your spending plan. You make the rules. What’s important to you. That’s where you want to plan to spend your money.

If you want more money to put toward your spending priorities, you can revisit some of your fixed and regular expenses and look for places to save some money.

Don’t forget to build up some reserves too. An emergency fund is important. You also want to prioritize paying down debt, but what’s important is up to you.

Again, it’s your spending plan. It’s your money. You decided where you’re going to spend it.

What do you think? How’d it go? Are you happy with your spending plan? Let’s see how it works for the next couple paychecks and then revisit your spending plan. Make updates and adjust.

This is how Tip Yourself budgets. We make spending plans.

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A lifelong student of habits and behavior change. Mike is the CEO and co-founder of Tip Yourself, a mobile app and community focused on saving money through positivity and small shifts in habits.

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