So far, everything we have done in our Back to Basics series has led up to one thing: making a plan that lists how you want to use your money BEFORE you start spending it. This allows you to make choices and be in control of your money rather than having your money control you.
A very basic spending plan might look like this:
Using the information gathered during Week One, Week Two and Week Three, put together a spending plan for this next pay period (the one starting today. Don't forget it is long!) Notice that I have roughly broken them into fixed and variable expenses. This can be quite helpful because it shows you how much of your income is pre-allocated, and also shows you where to look if you have to cut spending. If you have large expenses, such as rent, that need to be paid from more than one pay period, be sure to put that on your list even if it isn't actually going to be paid with this pay.
If you discover that your spending plan requires more income than you have, then some cuts will need to be made. For now, we are only thinking of short-term cuts, such as postponing a purchase or eliminating pizza night. Long-term cuts, such as lowering your credit card payments, will come later. Think creatively to figure out how you are going to get through this pay period without spending more than you make. Can you eat things already in your cupboard or freezer? Can you sell some thing on Craigslist to bring in a few extra dollars?
If you find yourself with money left over once you are done planning your spending, then decide how you want to use it. Be sure to include your spouse in these conversations! Maybe you want to pay a little more on a credit card, or enjoy a nice date night at a real restaurant, or put it in your emergency fund. What is going to work best for you and your goals?
While this is a plan for just this pay period, it is also practice for future pay periods. Planning your spending, every month, will have a huge impact on your ability to control your money and ultimately fulfill your financial dreams.