Financial Fitness Challenge, February--Set Up a Spending Plan

Saturday, October 11, 2008

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Financial Fitness Challenge, February--Set Up a Spending Plan

by Susan Tiffany, CCUFC

You'll recall that last month we said the 'tracking expenses' task was necessary before you tackle the February major challenge--that's to set up a spending plan.

We can see you right now, ready to click off to something else. Hold up a few minutes. We'll try to put your concerns to rest and get you started on a lifelong productive habit.

It's your plan

First, realize that the spending plan is all yours to create--we don't monitor or review or critique any of your decisions, on this or any other challenge. Second, recognize that a spending plan puts some structure around your spending and allows you to achieve your financial goals. It's that simple. A spending plan is all about setting your own priorities and coming up with strategies to achieve them. Not so scary.

Last month's exercise in tracking spending likely provided some eye openers about where your money goes. Now you can use that information, and the Budget Blueprint calculator, to set up a family spending plan.

A spending plan is the same as a budget, right?

A lot of people shy away from the term 'budget,' thinking it will cramp their style when it comes to money management. The fact is, a spending plan frees you up to achieve the things you want to--that's why it's so important to start by setting your goals. That way, each time you're confronted with a spending opportunity, you can ask yourself--Does this serve my goal or prevent me from reaching it? So the term spending plan fits--because you're spending with a purpose instead of spending without thinking.

Do I really need a budget?

Do you have financial goals? Then you need a budget. Don't have financial goals? You need to make some, and then you need a spending plan--a budget--or you never will make any headway. Think of it this way: If you don't change your habits, your habits don't change. You'll just keep doing things the same way and not make real progress.

How involved does a budget have to be?

It can be as elaborate or simple as you want. Last month, one of the Challenge tasks was to track your spending. That exercise showed you where the leaks are in your budget. For some people it's several cans of soda a day from the vending machine at work--or more meals eaten out than in.

Remember, it's completely up to you--working with other family members--to decide what expenses are worth keeping in your spending plan. The point is, be aware of how you spend your money, regardless of your income level.

Then, beyond what happens to your carrying-around money, write down all your monthly expenses--use your checkbook register, bills, and receipts to tally up what you pay each month, using the Budget Blueprint calculator. (Print your form for reference; you won't be able to save data.)

That includes your fixed expenses--the ones that don't change month to month. That can be rent or mortgage payments, car payments, for example. It also includes a fixed amount you put into a savings account or investment vehicle each month--the 'pay yourself first' principle. Then look at your variable expenses--things like utility bills, groceries, credit card payments, or entertainment. Add it all up--and compare it with your take-home pay.

What if income and outgo don't match up?

That's when you make some choices--again, working with other family members--to make sure your spending aligns with your resources and your goals. Just keep in mind, using a spending plan makes it much more likely that you can reach your goals.

Because it's so important to engage all the members of your family, challenge two for February is to inform and involve your partner and kids in the spending plan. For ideas, read Birth of a Consumer: How to Teach Your Preschooler About Money and Life Change To-Do Lists.

Notable dates

Two national consumer events kick off this month. National Consumer Protection Week is Feb. 4 to 10. The theme is Read Up and Reach Out: Be An Informed Consumer. Organizers say, "Consumer information can help people recognize a rip-off, smell a scam, or find a fraud."

One of your best sources for consumer information is the "Consumer Action Handbook." This guide is full of helpful ideas about buying a car or house, preventing identity theft, understanding credit, resolving problems after a purchase, and much more. You can order a copy for delivery by March 1.

And America Saves Week spans February and March, beginning Feb. 25 and ending March 4.

America Saves Week is a great pairing for this month's Financial Fitness Challenge, as it keys in on the importance of goal-setting. It also focuses on a number of special populations, including members of the military and young people.

Share your ideas and thoughts about these challenges with us, and other readers, on the message board.

ST
askem@cuna.com