How to Use a Spending Plan, Part 2

Last week I began the series, “How to Use a Spending Plan.” In part one, I discussed the first two steps for establishing a spending plan:

1) List monthly income

2) List monthly expenses (including a misc. category)

(Note: your misc. category may need to be somewhat generous as you start, but it will grow smaller in time as you learn to more accurately predict your expenses.)

How do you currently pay for most of your expenses? Cash? Debit card? Credit card? The best way to control your money, I feel, is to pay with cash for as many spending categories as possible. When the cash runs out, you’re done with that category of spending for the month!

Determine which of your expenses could be paid with cash.

You may feel it dangerous to carry cash for one of two reasons:

1) the risk of loss or theft

2) the risk of spending indiscriminately

The risk of loss or theft is real, but not likely. Reduce this risk by not carrying large amounts of cash.

I think twice about my spending when paying with cash because it’s painful for me to part with cash. Swiping a debit card is much easier for me. You may be the exact opposite! Swiping a debit or credit card might be painful for you and cash might easily slip through your fingers. Decide which method is more “painful” for you–spending cash or swiping your debit card and assign this method of payment to as many of your spending categories as possible.

We do currently use our credit card for some expenses each month, like gasoline and a few online bill payments. However, we are always sure to pay it off faithfully each month.

Sit down with your list of income and expenses and assign a method of payment to each one.

Here is an example from a portion of our family’s spending plan:

Shorthand key:
C = Cash
√ = Check
D = Debit Card
Auto √ = Automatic Payment from Checking
C C = Credit Card


√ – Giving

Auto √ – Mortgage

C – Groceries

D – Online purchases

C C – Gasoline

C – Misc

C – Eating out


Does each of your spending categories have a payment designation now? Great! Stay tuned for the next step in part three.



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