Designing a Spending Plan

What is a Spending Plan?

A spending plan is the cornerstone of getting control of your spending. You have to know what money you have coming in, going out, and where it's going. If you don't make a decision about where you want to spend your hard-earned cash, then you'll never find a way to control it.

Why don't we just call it a budget? The term "budget" is too often associated with being limited, restricted, or locked down. Many people want to rebel when roped in too tight. That can lead to binge spending.

In MoneyWell, you will decide how much you want to spend for each bucket, but you are allowed to spend more if you want to take money from a different bucket. Let's say you want to buy an iPhone, but your bucket for equipment is short of the purchase price. You can decide that this month, you'll be dining out less and use money from that bucket. The only restriction you have with a spending plan is that you can't go into debt if you need money.

What is Debt?

Let's get clear about the term "debt," because it can be ambiguous. For our purposes, debt is defined as an unsecured loan. A mortgage on your house or a loan on your car is secured and not considered debt. Credit card balances are always debt. Asking Uncle Phil for money is going into debt. Getting a cash advance of any kind is debt. Remember, debt is the enemy, and our best weapon against it is to plan our spending and track where we spend money.