Ryan P. Cleary
Float Finance 4.1: Creating a Spending and Saving Plan
In this article we will overview how to create a spending and savings plan and ways to increase income and decrease expenses.
Float Finance is a series of accessible articles, tools, and resources designed to empower early career employees and students to navigate their financial journey.
Foundations of a spending and saving plan
A spending and savings plan (often called a helps you compare your income and expenses, understand where your money is going, and make adjustments to guide how you use your money so you can meet your goals. This brings together two important money topics: income and expenses.
Income is the money you receive, including:
Income from assets and investments
Other income such as gifts, child support, and alimony
Expenses are hoe you use your income (saving, sharing, and spending). Thinking about your income and expenses can be stressful if you’re struggling to make ends meet but in the long run can help you reduce your stress and empower you to make changes.
A spending and savings plan has three parts:
Your Net Income: this is your income after taxes and other deductions. This is also called your “take-home pay”. This is your income after taxes and other deductions. This also means we don’t have to include taxes under the expense category.
Comparison of Total Net Income and Total Expenses.
Instructions for Using Worksheet
You should start by downloading a copy of our worksheet located HERE. Here is how you will fill it out:
First, complete the Past Monthly Amount columns to record your net income and net expenses from last month
Next complete the Planned Monthly Amount columns to record what you think your income and expenses will be like. Don’t just copy the amounts from last month. Thing about whether you need to make any adjustments or changes. Generally, only cut back on things you believe are realistic and only count income that you can depend on.
Finally, compare your total net income and total expenses. These will auto-fill in the table.
Once you complete this, there will be three possible results in the Comparison Box:
Zero ($0): This means your income equals your expenses. We suggest finding ways to cut back expenses or increase income but you should be ok (especially if you’re already saving money)
A positive number: This means you have more income than expenses. Hooray!
A negative number: This means you have less income than expenses. You need to find ways to increase income and decrease expenses. In emergencies, you may need to take on debt to cover expenses and pay the debt down over time.
Using your Spending and Saving Plan
There are several ways to actively use your spending and saving plan throughout the month to gain control over how you use your money.
Recording your saving, sharing, and spending daily. Saving your receipts is a good first step. In addition to using receipts to track your uses of income, you can use them to check debit and credit card statements. There are also several apps and websites that can help you track your spending.
Collecting your change. Drop your spare change into a jar. This can help you build savings and keep your pockets or purse free of loose change.
Putting limits on spending using an envelope system. Label envelopes for categories of spending that you want to limit, such as “Groceries and Household Supplies” and “Eating Out or Take-Out.” Using your savings and spending plan, estimate how much you will need for each category for a week. Put those amounts in your envelopes at the beginning of each week. Use only what is in the envelopes for your spending. When the cash in an envelope runs out, wait until next week’s allotment of cash before spending more. You can learn more about an envelope system HERE
Establishing a weekly money check-in. Set aside a convenient time and day of the week for you and members of your household to review your actual spending against your spending and saving plan. Adjust your spending and/or your plan for the next week.
Conducting a monthly review. Review records of your spending for the past month using an app, receipts, or your own log of spending. Compare how your spending and saving plan did and did not reflect what you spent. Reflect on what you want to do differently next month and create a spending and saving plan for next month that is realistic and aligns with how you want to use your money.
Having a monthly goal-setting session. Have each family or household member write one or more goals for their spending and saving in the coming month. Be sure to also review progress toward the previous months’ goals.
Celebrating successes. There are many ways to celebrate success. For example, you could declare a family or household member to be Money Manager of the Month based on the person’s success at saving money or spending less during the month.
Preparing for taxes or filing for benefits. At the end of the month, identify expenses that may be important for tax time. Make sure to save the evidence of these expenses, such as receipts, invoices, or screenshots of online payments.