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What Is a Personal Spending Plan and How Do I Begin One?

written by: Stephanie Mojica•edited by: Laurie Patsalides•updated: 6/28/2011

While starting a personal spending plan is similar to starting a budget, several differences exist to differentiate these ways of handling your finances. Universities like Rutgers and financial recovery programs such as Debtors Anonymous both advocate use of a spending plan rather than a budget.

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    Primary Difference

    The term "budget" in itself may imply deprivation. However, a personal spending plan allows you to choose—within reason—where and how you want to spend your money on a monthly basis. A budget is usually fairly regular, such as $100 a month maximum for entertainment. Depending on your lifestyle, you could change categories as you see fit. Learning how to start a spending plan—and actually use it as a self-growth tool rather than a self-deprivation exercise—can really help you achieve more than just paying the bills on time.

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    Whether you call it a budget or a personal spending plan, some expenses, called fixed expenses, still can’t easily be changed. Giving your landlord or mortgage holder $200 one month and $1,000 the next will virtually always go over poorly. Remember there are consequences—both financial and possibly even personal—to not paying fixed bills as scheduled. These fixed expenses include rent or mortgage, car payments, day care expenses, health or car insurance and credit card bills.

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    Ideal Spending Plan

    Visioning is an important tool of programs such as Debtors Anonymous, which encourage financial recovery through group support, record keeping and finding a faith of your understanding.

    You may want to write down what you’d like to be able to spend each month, not thinking of your income. This could mean to create your own earning dream to fulfill. If you want trips to Europe and housekeeping services but can’t afford them right now, you may be able to someday. This is known as visioning. Defining your earning and spending goals is a great way to begin and use a spending plan.

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    Realistic Spending Plan

    One month you may wish to spend $200 on clothes and none the next month. This can be incorporated into your plan. You can look for ways to save on utilities, groceries and car insurance. But, write down the expenses and your income as they usually exist at this time.

    It is also important to incorporate categories such as savings (even $5 a month is better than nothing). Many people also wish to donate to a charity. You can incorporate a regular donation or make one periodically as you feel lead and financially able.

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    Record Keeping Basics

    The best way to use a spending plan is to make a note of everything you spend. Only by knowing what you spend on a regular basis can you really adequately plan for the upcoming month. Writing down expenses eliminates the vagueness that many people struggling with finances experience.

    Take your figures from a month, preferably two to three months, and start drafting from there.

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    Further Record Keeping Tips

    A small notebook is a good way to write down personal expenses, especially as you learn what a spending plan is and how to apply it to your life. Retain your credit and debit card receipts, and always know what checks you wrote. Remember that record keeping is as individual; there’s no wrong way to do it as long as you make an honest effort to find out what you are spending and what works for you. It may take time for good record keeping to develop and really become integrated in your life. This is OK. Remember, easy does it and you are taking a great step by your willingness to try for better financial clarity.