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How to Make a Spending Plan
- Establish where you are right now. Keep a diary of expenses for a few weeks and compare actual monthly expenses with monthly income. You may be surprised to learn that you’re spending $250 a month eating out in addition to $400 on groceries.
- Determine your monthly bring-home monthly income (BMI)—what you bring home after taxes, other deductions, and tithe.
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Divide your expenses into categories. List regular (rent, daycare, car note) and periodic (insurance, real estate taxes) expenditures, and savings. We’ve found that using more categories makes it easier to track expenses and target our progress.
- Assign a monthly spending limit to each category. Crown Financial Ministries recommends that expenses for housing (including utilities, insurance, and maintenance), auto (including insurance and repairs), and food (groceries and eating out) not exceed 70% of your bring-home monthly income. Subtract your regular bills from this income amount. Don’t forget to include a monthly amount for periodic expenses. Then subtract reasonable limits for necessities like groceries, gas, and clothing. If there’s any money left over, fill splurge categories like nails, cell phone, and entertainment. If the money ran out on paper before you got through all your categories, it will surely run out in real life too, so decide where to cut back.
Give yourself a few months to get comfortable with this process. If you are finding that you have more money left over in one category, or you are always running short in another area, shift your amounts around. You will also need to tweak the budget anytime your expenses or income change.
In our homes, we’ve learned that managing our money this way doesn’t feel like bondage because it fits our lifestyle. Furthermore, the budget holds us accountable, so we are free to accomplish our financial goals according to our family’s priorities.
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