How to Review Your Spending Plan Efficiently

October 30, 2014

Connect Member

Helping women to make financially intelligent transitions: Your Money, Your Life...InSync

Unless you’ve been living in a cave on a remote island in the Pacific (one without wireless access), you have probably heard a lot of talk between various parties trying to agree on a sustainable spending plan. And I am not talking about your friends or neighbors next door but the state of Pennsylvania as well as good old Uncle Sam. Not to get too political, but both sides are arguing for their right to certain expenditures: The Democrats make their point by detailing the need for one program or another, and the Republicans shoot it down in favor of their own agenda.

It sounds very much like a conversation that I have regularly with my husband. It usually starts with the cable bill, which seems to increase exponentially with every statement. What we once budgeted no more than $50 for is now more than $200 a month. Those HDTV signals, cable boxes and on-demand movies add up. Tack onto that an essential that was not even on our list when we bought our home — the Internet. This discussion usually leads to a rather animated debate about our overall monthly expenses and ways to “cut the fat.” And alas, much like Congress, we seem to disagree on what qualifies as “fat.” Although this process can be nerve-racking, the end result is a renewed sense of feeling more in control of how we are spending our money.

If you are looking to feel more in control of your finances, start here.

Do the Prep Work: Creating a realistic spending plan (aka “a budget”) requires a little preparation. This is especially important when living as a single adult. The first step is getting an accurate listing of your income and expenses. This is not the most exciting assignment but it is vital to keeping your household finances in order. It is the foundation on which your larger plan is built. Ultimately, the end result will be having a better idea of where your money is coming from, how much is there and where it is all going. The best way to accomplish this is to list all your sources of income for the month as well as your monthly expenses. This information can be obtained through a review of your financial statements as well as a review of your monthly bills.

Break It Down: When listing your expenses, break them into two categories: fixed or variable. The fixed expenses rarely change and are required living expenses, such as a mortgage or rent, car payments or the electric bill. The variable category is for those that can change from month to month. This includes gasoline, entertainment, eating out and gifts. The variable expenses will be important to review when adjustments in your spending need to be made.

Review Regularly: It is important to review your budget on a regular basis to make sure you are staying on track. After the first month, take a minute to sit down and compare the actual expenses with what you had created in the budget. This will show you where you did well and where you may need to improve. If you are experiencing a transition in your personal or financial life such as a divorce or a new job, it is more important than ever to do this exercise. This will help you to stay in front of any financial snags.

Pay Your Bills: We know, it sounds simple, but there’s more to it. A big concern for women taking control of their financial lives is getting on a regular schedule of bill paying and budget review. Even though there are great online tools to automate bill paying, it is still a good idea to review your monthly statement in detail. This not only gets you into the habit of looking at your expenses, but also creates a visual reminder of what those Jimmy Choos really mean in financial terms. It’s OK to treat yourself on occasion, but actually looking at your statements will help you see if there is anything you need to give up to stay on financial track. A good way to stay on track is to set a weekly time and date to pay your bills. As the statements and bills come in, put them into a folder online or in a file drawer. Then each week, say on a Sunday night at 8 pm, sit down and review your statements. Any bills that are due that coming week should be paid. (Remember to allow enough time for the check to reach its destination.) Then file the statements and bills away in case you need to refer to them in the future.

To reduce your anxiety about your financial future, follow and regularly review your spending plan. It is vital to keeping your financial house in order. The same rules apply whether you make $40,000 a year or $200,000. Spend less than you earn and save the difference. By following your spending plan and using your creativity and self-control to make any needed changes, you will feel more in control of both your financial and personal life.

Looking for financial and investment advice from a trusted advisor?

Loretta Hutchinson CFP®, CDFA™, NCC is a Certified Financial Advisor with Harvest Group Financial Services and President of Financial Divorce Plan, LLC in Langhorne, PA and Naples, FL. She can be reached at , or 215-860-6056.

Securities and advisory services are offered through Centaurus Financial, Inc., Member FINRA and SIPC, a Registered Investment Advisor. Supervisory Branch: 3902 State Street, Suite 101, Santa Barbara,, CA 93105, 1.888.569.1982. Harvest Group Financial Services and Centaurus Financial are not affiliated.

Loretta Hutchinson is a member of the DailyWorth Connect program. Read more about the program here.