My Story: The Spending Plan

contributed by Anne

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I call the budget the single most terrifying and most necessary financial tool. It's frightening to lay everything out with the possibility of seeing in black on white that we are not living within our means and we need to cut back. On the other hand, knowledge is power and having that knowledge leads into a second tool that I consider absolutely necessary for our money management, our Spending Plan.

I am home full time and my husband's employer pays every two weeks. That means that ten months of the year we get two checks in the month, the other two months we get three (I call the third check the "catch up check") and none of them come on the same day of the month the way the bills do. To handle this, I made a spending plan.

My spending plan is based on two checks each month. I assigned each item in the budget to one of these two checks. I save money for bills that come in the second part of the month out of the first check of the month, and money for bills that come in the first part of the month is saved out of the second check of the previous month. The mortgage comes out of the second check of the month, tithing and most of money for savings comes out of the first check. Groceries, gas for the cars, and other ongoing expenses are divided equally between the checks.

I am sure some of you are saying, "I don't make enough to save money." How do you cover bills that don't necessarily come each month like car insurance, memberships or annual fees? I divide the amount I need to have by the number of months I have to save it and set that aside each month. Effectively, this type of savings is an expense that stays in our pocket until it's time to pay up. I also have "black hole savings," which is an emergency savings that I put something into each month even if it's only one dollar. When we have an unexpected bill, it helps to have some cash to put toward it so that there is less that I have to put on a credit card or otherwise scramble to find. My goal is to grow this savings into the three to six months of income recommended by financial advisors.

I use a spreadsheet to manage all this, but quite honestly, it can be done with a simple sheet of paper and a pencil. Just make sure the total of all the spending is equal to the total of the budget, that the budget total is less than the monthly income and that the spending plan for each check is less than the amount of the check. I shoot for "less than" to allow for small fluctuations in costs.

I also make spending plans for our "catch up checks," tax refunds if we get them, or any financial windfalls like the economic stimulus checks. Again, this is not something people like to do, but when we have a plan for spending the money, we find we have more flexibility. We may need to set some money aside for important goals, but look how much closer to those goals we are! If there is money left over, and I try to have a little left over if at all possible, we can have fun with it. Maybe it's not as much fun as we expected, but it is far worse to not have bills paid or not have the savings we need when we need it than to enjoy ourselves creatively with a little more limited resources.

Again, this is scary, terrifying, even intimidating to start. Looking at our financial situation in stark black and white is not fun. However, the more uncertain the income, whether from lack of regularity or limited means, the more important a budget and spending plan are. These are tools that allow us to have a measure of control and certainty in spite of any difficulty. Can't seem to save money? Plan when in a savings plan. Having trouble covering bills? Figure out when the bills come, have the money saved ahead of time and pay them the day they come in. This will improve your credit rating, give you more security, and give you more financial freedom.

I mean what I say! I've been doing this for fifteen years. Our credit card is paid off, and we have been able to cover our unexpected car repairs this year with cash instead of relying on credit. That felt wonderful! You can get to this point, too, with discipline, a budget and a spending plan.

"My Story" is a regular feature of The Dollar Stretcher. If you have a story that could help save time or money, please send it to

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