DEFINITION of Personal Spending Plan
A spending plan is a document used to determine the cash flow of an individual or family. A personal spending plan, similar to a budget, helps outline where income is earned and expenses are incurred. When paired with a financial goals worksheet, the personal spending plan can be used to create a roadmap for monitoring spending, as well as helping determine the most appropriate methods for saving.
BREAKING DOWN Personal Spending Plan
A personal spending plan is a different take on the traditional budget. While many people may be familiar with their sources of income, such as a salary from a job, fewer know the patterns associated with where that income is spent. A family may want to integrate a household spending plan in order to track what each member of the family spends and find ways to save or budget funds.
The personal spending plan is often more detailed than a standard budget because it requires more information about each item. By documenting and categorizing all sources of spending, individuals and families can better understand whether funds are being spent on items that detract from their ability to save for and reach their financial goals.
Making Financial Goals with a Spending Plan
Financial goals are integral to making a personal spending plan work. Financial goals, such as saving money for a vacation, or buying a new home, help individuals determine how much money should be diverted from living expenses into savings and investing.
It is not necessary to use a financial planner to make a spending plan, it can be as simple as using a shareable spreadsheet or online money tracker. Reporting all spending is necessary to keep an accurate and detailed account of each category of spending, like groceries, school-related fees, or entertainment. Some experts recommend families or single person households spend a month or two recording all their expenditures before embarking on a spending plan. In doing so, it is likely possible to make realistic financial goals, when it comes time to implement a spending plan.