Lesson 3 - Create Spending Plan

Objective: Create a spending plan that includes savings and cash inflow in excess of cash outflow.

Now we know how to reduce spending leaks, we’ve tracked expenses for at least a month, we know how to separate fixed and flexible expenses, and how to set up an irregular expenses amount on the spending plan – time to put it altogether! A few additional things to remember – for your flexible expenses, make estimates based on your previously tracked expenses, but be sure to make adjustments for any spending leaks you’ve plugged or regular spending you’ve reduced. Also, be sure that you have savings included for your goals! You’ve created at least one SMART goal earlier in this program, which should be a part of your spending plan, in addition to any other savings goals and your irregular/season adjustment as savings amounts in your spending plan. Lastly, if you don’t have 3-6 months’ worth of expenses in emergency savings, you may want to save towards that as well. While the typical suggestion is to try and save 10% of your after-tax income, as long as you’re saving for your goals and working towards building up emergency savings, you’re doing a great job! The other consideration, be aware of changes in flexible spending. Do you expect to use your AC or heat more this month? Do you expect to be driving more this month? Be sure to make any necessary adjustments to flexible expenses for the coming month.

Now it’s time to create your spending plan – there are a number of ways to do this, use My Money Lesson 5, or you can use web-based programs, such as www.powerpay.org, which is a free site run by Utah State Cooperative Extension.

Example

Here is an example spending plan, using www.powerpay.org:

Note: The savings amount includes both the $100 of savings from Lesson 1, and the $150 irregular/seasonal adjustment from the previous lesson.

Assignment

Given your current monthly income (estimate this amount if you are paid hourly instead of salaried), and a your list of past spending in flexible and fixed expenses areas, create a spending plan that includes a reduction in flexible spending, as well as regular savings and income in excess of expenses.

Note: For this assignment, we would like you to use www.powerpay.org and to take screenshot of your spending plan and email the results, along with any text-based notes. If you need help with creating screenshots, click this link. Also, if you need help with inserting the screenshot image into a Word document, please contact your course facilitator. This particular assignment will likely require two separate screen shots to show all the information. 

You must also distinguish between the amount saved for your goal and the amount saved for the irregular/season adjustment, and include a very brief explanation in the Word document along with your screenshot(s). 

Complete this assignment in Microsoft Word - if you do not have access to Microsoft Word, contact your course facilitator. Once you've completed the assignment, email the Word document with the assignment to your course facilitator, who will provide feedback via email.