In honor of Financial Literacy Month, we created a microsite that offers 30 simple steps to financial wellness–one for each day of the month. To enrich the experience, we asked some amazing people to guest post during the month on a topic that is related to the day’s step. Their dedication to financial literacy is truly inspiring! Today, Lynnae of BeingFrugal.net talks about documenting your desired spending.
When getting your financial life in order, it’s not enough to know where you’ve been. You need to know where you’re going. What is it they say? Failing to plan is planning to fail? That’s definitely true when it comes to financial planning.
By now you know what you are spending every month. You know where that money is going. But chances are, you have financial goals you want to reach. Financial goals that aren’t being met by your current spending habits. Maybe your goal is buying a house. Or paying for your child’s college education. Or a trip to Disneyland. It doesn’t matter what your goal is. What matters is that you have a plan to get there.
In order to meet your goals, you need to write them down. And don’t just stop at your broader goals. Write down the steps to get there. Document your desired spending.
A week ago, Frugal Homemaker told you how to track your expenses. Now that you know where your money has been going, you need to make a plan as to where you’re going to spend it in the future.
If you’re like me, you found a few surprises the first time you tracked expenses. I was absolutely shocked at the amount of money my family spent on eating out. $20 her and $20 there really adds up over the course of a month.
The way to make sure you don’t overspend is to create a budget. Or a spending plan. Whatever you want to call it. Sit down and decide how much you want to spend on the different areas of your life. Write it down. Review it often.
Documenting your desired spending is important, because it gives you a plan. And contrary to popular belief, budgets are actually very freeing. Sure, you can’t blow $100 at the mall without thinking about it. But it feels great to have the money available to pay for that unexpected car repair, because you had the foresight to plan for it. And you can still buy things at the mall, if you like. Just make sure it’s in your financial plan, before you spend.
Like any plan in life, a budget isn’t set in stone. Feel free to adjust it frequently, if you feel it isn’t meeting your needs. And make sure you set aside some fun money, too, or you won’t stick to your budget very long.
The bottom line is, without a written plan, a financial goal is just a dream. In order to turn that dream into reality, you need to write down a plan to achieve that goal. Start today. A pencil and paper is all you need. Make a plan. Then follow it.
Lynnae started blogging at BeingFrugal.net as a way to hold herself accountable for the financial decisions she makes. She also hosts an online talk show called Frugal Coast 2 Coast along with Frugal Upstate blogger Jenn Fowler.