Let’s get the elephant out of the room right away and admit that a spending plan is pretty much the same thing as a budget. Many people have bad connotations of the word budget. “Budget” often makes people feel scarcity – that a budget is telling them what they can’t do and placing limits on them. Many people feel that the word ‘budget’ = the word ‘no.’ That is why, when I’m working with my clients, I like to refer to the monthly plan we create for our money as a spending plan. We are going to spend the money anyway, let’s make a plan for the spending. This gives better feelings of abundance and allows us to get into a ‘Yes’ mindset. We create a monthly plan, not to be restrictive, but to be empowered and confident in our decisions.
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There are a lot of resources you can find on how to create a budget or spending plan. I would like to share the one that has worked best for me. In most cases, when we create our plan for the month, we write down our income and everything we need to spend money on (bills, groceries, etc.), and then we think we’ve written a budget. How many of you are successful at following your money plan each month? I sure wasn’t. And I would get so frustrated with myself, and then go spend a bunch of money because I figured I already messed up anyway. Or, an expense would come up that I did not plan for, but that had to be taken care of.
The problem with budgeting and the reason why money can make us so miserable is that we are spending according to someone else’s priorities. A spending plan is simply a written statement of your financial priorities. We need to spend more on what we value and what makes us happy, not what other people tell us we should be spending money on. This is the way we are going to be able to stick with our plans, and why we haven’t been able to in the past.
How do we build a value-based plan?
1-Know what your values are! What are your goals? Where are you going? What makes you happy? Who would you like to be? What do you want to provide for your child(ren)? What doesn’t make you happy? What makes you frustrated, anxious, despondent?
Knowing who you are and what brings you joy will be vital to creating a plan that is built upon your values. A value-based plan cannot be created if you don’t know what those values are! Some of the things I value are: knowledge, time with family, order and cleanliness, experiences and fun, God and faith, kindness, healthy eating, creating passive income, and goals/progression. Thus, when I am creating my spending plan, I build money in my plan for experiences (dance lessons, trip to the zoo) and not so much for toys or ‘things,’ based on my values of experience and fun, as well as cleanliness and order.
2-We must know where our money is going. That is why tracking your money is so important. (Here’s an article all about that, if you missed it: https://thelifeofasinglemom.com/organizing-and-gaining-control-of-your-finances-by-nicolette-alger/) Without this awareness, we won’t be able to know what is truly happening, and we won’t be able to make changes.
3-Evaluate what you have learned. Once you have gained awareness of what you value and where your money is going, you need to evaluate what you have learned. Is your money going to things that you value or that bring you joy? If not, how can you change that? Can you get rid of something that you don’t value so you can spend on something that you do value? (For example, I LOVE books! I was paying a whole bunch of money for cable TV, and I don’t really love TV or my kids watching too much of it. So, I canceled cable, bought a Netflix subscription, and assigned some of my cable subscription money to a ‘Books’ category so I could order a book or two off of Amazon each month if I wanted to.)
4-Cut back on ‘stuff.’ If you have a big miscellaneous or ‘stuff’ category in your spending plan, reevaluate if this ‘stuff’ is contributing to your joy. I like to use the 24-hour rule before a purchase that wasn’t planned for. I wait 24 hours, and if I still want to buy it, I have to sit down, see how it can work in my plan for the month, and then make the purchase if I can make it work in the plan.
5-Have the ‘bigger picture’ in mind. One of my favorite quotes says, “Things which matter most must never be
at the mercy of things which matter least.” -Johann Wolfgang von Goethe. Vision boards, written goals, reminders of what you are working towards can help you reframe your spending plan and keep you focused and on track during the month.
6-Pray. Ask God to help you to know where He would like you to use your resources and how He would like you to spend your money. Ask Him to help you stay on track. Ask for His help in all you do. God is good. He will help you, and you will see miracles happen if you rely on Him and do your part.
7-Reevaluate. Set a time to reevaluate your spending and your plan to see if they align. You could do this monthly, quarterly, annually, weekly, per paycheck, etc. The frequency will depend on how new you are to budgeting, and how fast you want to see changes. Personal finance is only a little about the numbers and a lot about behavior. Peter Drucker said, “What gets measured, gets managed.” As we ‘measure our behavior’ regularly, we will be able to determine if our spending plans are based on our values and if our spending aligns with both the spending plan and the values the plan is based upon.
Nicolette Alger has a Masters degree in Family Financial Planning. Beyond her formal education and training, she has her own personal story of financial hardship, and a journey of learning, progression and mastery. Her studies began in early adulthood when she was a newlywed and hoping to start a family. Realizing she knew very little about how to apply practical principles in finance, she began a self-study journey which led her to discover her passion for all things finance. But it wasn’t necessarily money she was after, rather personal freedom, choices, opportunities and the ability to help others. Money brings these opportunities. As a mom of four little girls, Nicolette’s passion is educating and coaching women to take control of their finances, so they can be good stewards of their resources, and create freedom and opportunities for themselves and their families. You can find her blog and services at www.nicolettealger.com.
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