We've made it to Week Four of our Back to Basics series, and I hope that nothing has been too hard so far. This week's focus is really the key to the whole idea of financial management: planning your spending before you do it, making sure that your needs are taken care off, and choosing wants that meet with your values and goals and dreams.
Today's exercise isn't difficult but it might take a bit of time. Sketch an outline of a basic spending plan. I use a monthly budget because that is how the military works, but you might choose to use a spending plan for each individual paycheck. When we were first married and money was particularly tight, I planned our spending by the paycheck because it felt less overwhelming.
You can do this on paper (I'm a geek, so I like those green ledger books) or online. You can use special software or a plain Excel spreadsheet. It doesn't matter how as long as you do it. I will say, however, that I find it remarkably satisfying to have it on paper. I'm not sure why, but the computer just doesn't do it for me.
For whatever period of time you are using, write down your expected income. I recommend you use take-home pay so that you don't have to subtract back out all those deductions. Then make a list of all your obligated expenses (rent, car payment, etc.) and then list all your necessary spending (food, gas, etc.) Once you subtract all your obligated expenses and necessary spending from your income, you will know how much money you have left over to save, pay off additional debt, and spend on non-necessary items. Don't allocate it yet, just figure out how much you have. This is going to look similar to the SITREP from Week One of this process, and you can use the same information to get you started.
We'll work on the details of the planning later this week. For now, get the main pieces onto paper (or the computer, if you must) and just think about it for a while. Don't panic if there isn't enough money - we'll get to that, too.