How do I Make the Best Spending Plan?

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  • Written By: Felicia Dye
  • Edited By: Melissa Wiley
  • Last Modified Date: 03 February 2020
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If you want to develop a good spending plan, you need to accurately determine your income. Deduct your required expenses from that amount and try to reduce your debt by paying extra on credit cards and loans. Set an amount to contribute to your long-term savings and investment accounts. While you want to make sure all of your obligations are covered, your spending plan should not be unrealistically stringent.

The development of your spending plan should begin with an accurate account of how much money you have coming in. When you are figuring this out, you want to calculate all income, including sources such as child support and odd jobs. Only once you have done this will you be able to properly determine the best method to spend your money. Before you make those decisions, you should be ready to commit to them. A budgetary plan cannot be effective if you do not stick to it.

After determining how much income you have, you need to begin listing and deducting your mandatory expenses from that amount. This will include items such as rent, utilities, and auto insurance. The costs of some items may fluctuate, such as electricity and telephone bills. It is important for you to try to allot for a reasonable average in your plan for these expenses. Remember that it is better to predict an amount in excess than it is to have insufficient funds when it is time to pay your bills.


When you are developing your spending plan, debt reduction should be a primary goal. If you have loans or credit card balances and you can pay more than the minimum, you should. Old debts that you have been ignoring should be included in your spending plan, even if you can only afford to pay small amounts for them.

Personal finance professionals commonly recommend that people try to save at least 10 percent of their income. This amount should be considered long-term savings. If you want to begin investing and you do not have other available income, you may want to consider diverting some of the funds that would be for savings. Money needed in the short-term future, however, for items such as a new car or a vacation, should not be taken from this 10 percent unless you already have a significant amount of long-term savings.

If your income varies each month, you may have to adjust your spending plan accordingly. This does not mean that you should abandon all standards. You should have set minimums in place for certain financial obligations. Those expenses, such as old debt, that must vary when your income varies should be obligatory any time funds are available.

A good plan is one that is realistic. It sounds positive to develop a spending plan that pays your bills, reduces your debt, and allots money for savings and investments. Being a human, however, means that you will most likely succumb to human nature at some point, which involves spending for unnecessary and leisure items. Whether it is for treating yourself to lunch, buying house wares, or going to a club, your spending plan should include at least a small amount for pleasure spending.

Being realistic also means that you should not try to spend every cent. Doing so is likely to create financial stress. No matter how well planned your budget is, there will be times when unexpected expenses arise. This may happen before you have built up a significant amount of savings, so it is always a good idea to leave some money unaccounted for. If it is not needed, you can add it to your savings or investment accounts.



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