Creating a spending plan and sticking to it is essential to operating well with your personal finances.  A spending plan provides clarity on your income versus your liabilities.  It is too often that deviating from keeping good records on where your dollar is being spent seems to happens when things are going well.  Your record keeping appears to become worse when your financial challenges escalate.  Why?  When things have spiraled out of control, some people tend to fall into a place of complacency and develop a learned behavior of “Avoidance”.  The bills are avoided, spending controlled becomes avoided, sharing with your spouse or significant other becomes a secret.  Now, blinders are on and structure becomes obsolete; unimportant.  There are advantages to operating with an effective spending plan and some of them are:

  • You have clear knowledge of the state of your finances – Understanding where you stand will help you to avoid overspending or guessing how much money you have to spend for certain purchases.
  • Keeps you focused on your money goals – A spending plan keeps you focused on the prize. Monetary goals are met when you are disciplined.  Lackadaisical behavior makes it almost difficult too impossible to meet your goals.  Keep your written spending plan and goals before you, visiting them at least once a week until you have developed a sense of discipline to stay on track to accomplish your desired goals.
  • Helps you to gain control of out of control spending – Impulsive spending can happen with or without an effective spending plan. However, executing a sound spending plan, listing all of your income and expenses; giving every dollar an assignment is crucial and helps you to reign in bad spending habits.
  • Enables you to communicate with your spouse or significant other about your spending – A written plan is a tool that makes it easier to use, to paint a picture of the condition of your personal finances. It is often times difficult to spill off numbers to someone to help them understand how much money is at their disposal.  The most efficient and less stressful way to communicate about your finances with your loved one is to show them a written plan.

The disadvantages could be:

  • Adjusting to the process – For those who are not used to structure will find gathering the data and sticking to the plan be a little uncomfortable. During this process; out of site out of mind is not a viable option; every obligation or asset is needed to create a functional spending plan.
  • You could feel stress or stretched – If you are not accustomed to communicating with your spouse or significant other; this process will stress or stretch you. You choose…being stretched is always good.  Operating without a sound plan could continue to increase your level of stress about your finances.
  • Lack commitment – Commitment to seeing the process through requires patience. Be patient with yourself and others involved.  Adjusting from a disorderly operation to a more structured way of doing things does not happen overnight, but over time.

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