The Power of a Spending Plan to Maximize Your Life

I’m convinced that everyone has a budget, even if they don’t consciously recognize it as such. From the solid anti-budgeter to the simply agnostic to the hardcore money nerd, we all have ways of managing future spending.

Maybe you simply add and subtract from your bank balances in your head (a mental budget!) to make sure you can get through the month, week, or sometimes even the day.

Or, perhaps you use a 50/30/20 budget where you save first and then figure out the rest of your fixed and discretionary expenses.

If you’re a budgeting guru (hi, that’s me!), you might use detailed budgeting software and spreadsheets to plan out every penny already spent and every penny you plan to spend in the next 12 months.

None of these budgeting methods are inherently “right” or “wrong.”

What’s the Difference Between a Budget and a Spending Plan?

But first, let’s acknowledge that the word “budget” gets a bad rap. When we think of budgets, we often think of restricting spending. You may recognize this cycle:

  1. Create a detailed and restrictive budget (because starting in January, you really are going to stick to your budget and not spend so much on eating out for-crying-out-loud).
  2. Blow your budget mid-month and feel guilty.
  3. Get discouraged, determine that budgeting isn’t for you, and give up until next January (because next year will be easier, like….for sure).

If you can relate to this situation, it may be best to shift away from the word budget and instead think of it as a spending plan. The word “plan” sounds much more flexible, which is how your budget should be. Yes, they are the same thing. Exactly. The. Same. But words matter because so much of our thought process is determined by our past connections to certain things.

With a spending plan, the focus is on being intentional with your money. It’s about realizing that things do come up mid-month, priorities shift, and adapting and changing your plan is okay.

Why Isn’t It Enough to Just Track Expenses?

There’s no doubt that tracking your expenses adds significant value. A clear picture of how much you earn and spend enables you to make better financial decisions.

However, there are a lot of additional benefits to creating a spending plan before you spend money. A spending plan increases your awareness of your priorities, helps you be more intentional, and ultimately allows you to confidently spend more money on things you value while ensuring that your financial goals are adequately funded.

Benefits of a Spending Plan

If it weren’t financially worth it to create and keep up a spending plan, no one would do it. But, the benefits go significantly beyond just the financial aspects.

Saving More Money

Those who consistently have a spending plan save more money than those who don’t. It sounds obvious, right? The things that you pay attention to in your life, including finances, are the ones that improve. It really is that simple.

Your future self will thank you when you’ve prioritized saving for emergencies, long-term goals, and especially retirement.

Having More Money to Spend on Things You Love

Keeping up a spending plan isn’t just about saving more money. We tend to focus too much on the importance of saving and not enough attention on how to spend money.

When you’re creating your spending plan, it’s important to keep your values in mind. If being healthy is important to you, then additional grocery costs (fresh food isn’t cheap!), gym memberships, and other wellness expenses should be prioritized above things like eating out and TV subscriptions.

Confidence in Your Decisions

It scares me that so many people enter into huge financial transactions like buying a home or taking on an expensive car payment without really understanding how it will impact them.

Creating a forward-looking budget can help you analyze the impact of big decisions and whether you can reasonably afford a large purchase without sacrificing other financial goals and values.

A Sense of Control Over Money

A common theme I see in people that I help with their budget is that they feel like they have plenty of money, but they aren’t exactly sure where it’s all going. There’s a sense of frustration when we don’t feel like we have control over any aspect of our lives.

Fortunately, money (unlike parenting, ha!) is something that you can work at and gain control over. No one is perfect at saving and spending, but perfection isn’t necessary to regain control over your financial life. A spending plan is a way of telling your money where to go.

Ability to Prioritize More Important Things

One of the most significant results I found from getting my financial life in order (and a spending plan was a huge part of that) was a direct result of no longer worrying about money. I realized that I didn’t think about money nearly at all aside from creating and following my spending plan, and my mind and time were freed up to focus on things that were more important to me.

Final Thoughts

A spending plan is one of the essential foundational tools for optimizing your financial life. From gaining peace of mind to saving and spending more money, it’s something that provides an incredible return on your time and energy spent.

So, if you’ve tried and failed to keep a budget, remember that it’s about flexibility and improvement, not restriction.

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welcome!

I’m Kathryn Hanna-wife, mother of 3 and a Certified Public Accountant. I love to budget (really, I do!) , build spreadsheets and spend money on travel, sewing supplies and good chocolate.

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