STEP 3 – CREATE A SPENDING PLAN

Now that you have reviewed your financial past and determined you current situation, it’s time to focus on the future.

By creating a spending plan (i.e. a budget) you can plan your income and expenses ahead of time. This will allow you to determine the financial flexibility that you have pay off debt, save, etc.

I recommend completing an annual spending plan as well as individual monthly plans. The annual plan will give you a tremendous snapshot of your total net income and expenses for the year. It will also give you some more motivating numbers. For example, if you see that you will be able to pay off $15,000 in debt if you follow the plan, I imagine you are more likely to stick with it.

Creating monthly spending plans will give you a more detailed look into the month ahead. You will be able to easily track your expenses for the month to make sure that they are in line with what you planned.

Next: Step 4 – Save a Little Cash

P.S. If you are debt-free (excluding your house) you can move straight to Step 6.