Families who have a spending plan say it is an effective tool to help them get a grip on their money. A spending plan can help families spend hard-earned dollars more effectively, live within their income, reduce the need for consumer credit, save for things wanted and develop skills in financial management.
We have discovered 5 steps in developing a successful spending plan. Over the next few weeks we are going to lay the steps out for you. Here is step one.
Step 1 – List Income
There are two parts to the first step actually… Part one is deciding which family member will take the leadership role in organizing the income and expense records so your spending plan can be developed, reviewed and modified as needed. Once you have established who is the primary family member in charge you can proceed to part 2.
Part 2: List the income of all earners in the household. On the Monthly Spending Plan worksheet (attached) , record the take-home figure, or the amount actually available to spend after deductions (base estimates on previous income and current prospects). If income fluctuates sharply, as it may for seasonal workers, commissioned salespersons, farmers/ranchers and other self-employed people, play it safe by making two estimates. Work out the least and most income figures that can be reasonably expected. How long can those incomes be depended upon? Are there other family members who are potential income earners? Possible sources of income include:
• Earnings from employed family members
• Unemployment insurance compensation
• Withdrawal from savings
• Tips or commissions
• Interest or dividends
• Social Security
• Child support or spousal maintenance (alimony)
• Public assistance
• Veterans benefits
• Retirement plan benefits
Check back next week for step two!!!