If you’re like most people, you find that spending money is a lot of fun! Depending on your money personality, you probably enjoy some aspect of shopping for either the latest trends, bargain hunting, or buying impulse goods. To ensure you have the means to buy these things now and in the future, you need a spending plan that allows you to splurge whenever and however you like!
The majority of the population has no problem spending money due to the temporary pleasure it brings. Many times it’s done to such a great extent that they don’t even realize how much is getting spent, either. As a result, they’re likely living beyond their means, taking on debt, and are unable to build a cash runway to pursue their dreams!
Traditionally, budgets have gotten used to help people control their spending and while they do work, they’re not for everyone. In fact, many people refuse to budget because it feels restrictive and confining which impacts their ability to spend freely and enjoy life!
Luckily, there’s another way to manage your money. For those who despise budgeting and would rather splurge instead, then a spending plan may be a better way for you to achieve financial freedom!
The reason that most people who budget are successful is that they have financial discipline. They can set limits on their monthly expenses and have a regimen to stick to them. As time progresses, they’re able to save, invest, and eventually have independent wealth!
Most often, those who detest budgets would rather spend freely instead. They enjoy buying what they want when they want it, without feeling guilty or like they’re doing something wrong. Still, these individuals need a strategy that helps them secure their financial futures as well.
A spending plan allows you to make important purchases now while planning for the ones that will be in the future, too. Instead of restricting where you spend money, it encourages you to do so in a way that also helps you to create wealth!
With a spending plan in place, you no longer need to keep track of where each dollar of your income is getting spent. Once you’ve put money aside to cover your future spending, then you’re free to expend however you like!
For example, suppose that spending money on entertainment brings you great joy and is one of your favorite expenses. Then, you should allow yourself to spend heavily in this category and you can as soon as you’ve paid yourself first.
Since entertainment is important to you and you’ve found that it improves your quality of life, you’re likely going to want to continue spending money on it in the future. To ensure you’re able to do so, you’ll also need to spend part of your income on assets!
Unlike a budget, a spending plan isn’t set in stone and can change from month to month. As long as you’ve put money aside for your future expenses, then you’re free to splurge however you like!
A spending plan is a financial strategy that allows you to buy the goods and services that are a priority to you. It also ensures you’ll have enough money to purchase them in the future, too!
Here’s a simple way to set up your spending plan.
The foundation of your spending plan is your income since you need it to buy goods and services. To get a complete picture of your earnings, start by writing down all of your sources and types of income. Then, beside each one list the amount you make and calculate their sum.
Typically, most people use their net income in their spending plan which is the amount of money you receive after taxes and benefits get taken out. However, using your gross pay will give you a better representation of your earnings. Not only that, but it allows you to see how much you’re spending on one of your largest expenses, income taxes!
With your income accounted for, you can now focus on the fun part – your spending!
Most people are excellent at spending money to satisfy their current needs and wants but aren’t as good at planning for their future ones. As a result, the first step in your spending plan should be to pay yourself first
By paying yourself first, you’re setting money aside for expenses that will come on down the road. Some of them are foreseeable while others you wouldn’t be able to predict in your wildest dreams!
For those who like to spend, paying yourself first is essential to achieving your long-term goals. In doing so, you’ll be prioritizing your future spending, instead of it being an afterthought!
The amount of income that you dedicate to paying yourself first comes down to your goals. The faster you want them to happen, the more money you’ll need to spend on getting them!
Try to scale your way up to putting 20% of your income towards your goals. At this point, you’ll still have an 80% burn rate which can get spent on your living expenses.
Once your basic financial needs get met, then you can feel free to spend however you choose. Depending on your priorities, you can spend further on necessities or begin satisfying your wants. Either way, it’s of little consequence because you’ve already put money aside to cover your future spending!
A spending plan helps people who enjoy splurging to do it comfortably as long as they’ve paid themselves first. This way, they’ll have money to buy assets that will compound and eventually get used paying for their future expenses!
Is your financial strategy based on a spending plan or a budget? Comment below.
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