How-to Guide: Set Up a Spending Plan

Money isn't just paper, nor does it simply make up number on your bank statement. It represents security, opportunity, and freedom. But for many, it's also a source of anxiety, frustration, and fear. Taking control of your cash flow is the fastest way to take the intimidation out of finance.

Lest you think that the answer is a strict b-u-d-g-e-t (we spell because we don't want to intimidate), rest easily. Instead, we're going to compile a shopping list -- a spending plan that will get you closer to your dreams. We've even taken some worksheets from the Fool's former personal finance service, Motley Fool Green Light, to make it easier on you. So grab a pencil and let's go shopping.

(Note that all of the worksheets below are in PDF format.)

1. Follow your money trail.
You wouldn't go to the grocery store without first seeing what's in your fridge. The same should go for filling your financial pantry needs. Fill out the "Where Does Your Dough Go?" worksheet for a bird's-eye view of your cash flow. We offer two versions, depending on how much elbow grease you have to spare.

2. Get to know your inner CFO.
Once you have a handle on your current financial empire, it's time for some superficial soul searching. The "Financial Self-Reflection" worksheet will help you home in on your spending priorities and lead you effortlessly into the next step.

3. Make sure the basics are covered.
There are some expenses -- and financial obligations -- that must come first. The "Cover Your Bases" worksheet will highlight your immediate money needs and help further shape your long- and short-term spending plan.

4. Set spending priorities.
Finally, you'll put your dreams, dollar requirements, and time frame all together on the "Set Spending Priorities" worksheet. When it comes down to the tough spending decisions, it'll help to have an accurate and clear idea of what it's going to take to get there. And, more importantly, it'll tell you how close you are to the next big payoff.

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  • Report this Comment On April 01, 2009, at 7:53 PM, blueberry2008 wrote:

    Although I am on the same salary as last year but I'm finding it hard to find the cash. I've missed 2 mortgage repayments. I'm currently trying to put myself back. I use a very simple free method.

    Set up an excel spreadsheet with the following headings in each column: Date, Money In, Money Out, Bank Balance.

    For the date enter todays date up until the end of the year.

    Enter for each applicable date the incoming money you will receive e.g. wages, social welfare.

    For Money out enter each payment you have to pay on each date e.g. loans, credit card, mortage.

    For balance enter the current balance on your account.

    For the continuing balance cells calculate the next cell by subtracting the money out from the money in and adding it to your balance this will give your next balance on your account.

    Don't forget in the money out column assign yourself some cash for each week and be realistic.

    By entering this data for the next 12 months it will give you a good idea on how your finances are for the next year. This can help you to determine if you will have money for future bills or additional payments of money that is due.

    Its working for me. I've calculated that I can pay my missed payments within the next 2 months.

    if your interested in further discussing this I've just recently set up a website and I'd appreciate if you'd be interested on giving me some feedback.

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