Creating a Personal Spending Plan
Thanks to Brookline's Society of Grownups over the last few years, us JUGs have seriously gotten our finances in check!
I was able to attend a session for bloggers last week on creating a spending plan, something that is crucial to staying on track. The strategies discussed were led by the attendees, mostly because a spending plan is created in a way so that spending matters to you.
Some key factors in creating a spending plan, is to remember that your "wants" are important, too! As you are solidifying what you want to purchase (and "wants" should be factored in to keep you more on track), you gain a better understanding of your priorities.
It is important to be intentional with how you categorize your spending. SoG suggested three buckets in which to place funds:
- Needs (50% distribution): the "essentials:" rent, loans, credit card payments, utilities, T pass, even coffee (!)
- Priorities (30%): best use for the future, long-term debt deleverage; savings account(s)
- Wants (20%): what brings you happiness; spend remainder after action is taken on goals
I loved the concept shared of "save, then spend," really the inverse of what most assume you should do, in pay your rent and expenses first, and then save. SoG advises the opposite, and it's just a modern-day model that we want to adopt.
In reflecting on spending habits, it is crucial to ask yourself the question of "Are you getting in your own way?" Consider what starts as an innocent trip to Target, you go in for paper goods, gift wrap and some Windex; coming out with $400 of stuff you didn't even know you "need." Things like this are a reminder to be mindful, not mindless. When shopping, have intention, and distract yourself so you're not just aimlessly wandering and grabbing at items.
Another tip I really valued is to create a nickname for various savings accounts. This mirrors having intention in spending, and if you have to take from an account, it's a bigger hit to borrow from your "house down payment" fund, rather than just "savings account." The bottom line is cash is cash, and without a label to your money, you're more likely to spend without intention.
We all crave that bonus at work, too, but don't plan to spend until you have the money. Have a plan in place before you get paid. That way, you can continually maintain spending balance.
A great takeaway from the class was to constantly revisit your money. Check in as your financial plan changes so that it evolves with you. It needs to change as often as your priorities, wants, compensation structure does since it is a value system unique to you!
SoG recently made some changes, so the best way to find them is through their website. This is a destination for online classes, financial calculators and ongoing advice from the SoG blog. Feel free to share your personal spending/saving techniques in the comments section!
This post is sponsored by Society of Grownups, a Brookline-based company offering classes, events, and financial advice to help navigate being a grownup and encourage conversations about money, happiness, adventure, and personal values. Check out their classes and more here.