One of the things I’ve learned in my life as a result of struggling with debt is how important it is to plan your month. Taking the time each month to start off on the right foot is crucial to ensuring your finances stay on track.
When I was in debt and not taking care of my money, I didn’t bother to do any of the steps I’m going to outline here for you. I just went along, by the seat of my pants, hoping everything would turn out OK, and at the end of the month, I’d be able to pay all my bills.
Guess how that turned out?
Not so well.
That is until I adopted these beginning of the month habits, and it made all the difference.
How To Start The Month Off The Right Way With Your Finances
1. Develop Your Spending Plan
You might want to start at the end of the previous month if you feel it will take considerable time to complete or if this is your first attempt. As long as you don’t get too far into the month, you can develop your spending plan within the first two to three days.
If you’ve never put together a spending plan, you’re first going to have to start by creating your spending and income categories. In essence, this is a list of all the ways in which you generate income and spend money. You don’t need to do anything fancy here. Simple paper and pen are fine, or you can do it in an Excel spreadsheet, the way I do my plan each month.
Your spending categories include everything – not just what you think you’ll be paying for this month. You’ll want to include fixed and non-fixed expenses or expenses that occasionally happen each month.
Once you’ve done this, you can plug-in the amounts line by line. Again, some will be fixed like your rent or mortgage, and others will fluctuate depending on what’s happening in your family.
Take a step back and see if your expenses exceed your income? If so, you need to cut costs so that all bills are paid and money is allocated honestly into the categories you’ll be spending from. If you put $400 in your food category, but historically your family spends upwards of $600 a month, then you need to figure out a different plan. Can you take from another group? If not, you’ll have to cut somewhere to make your money last.
Keep adjusting until all expenses are covered.
2. Review Your Plan with All Members of the Family
Ideally, you and your spouse would be working on this project together. But realistically it might fall to one member of the family. As long as you review it and get input and consensus from your spouse, I’m ok with one spouse being in charge of developing the monthly plan.
If your children are old enough to understand the concept of money, bill paying, credit, debt and the like – get them involved. Review the plan with your children, particularly if you are trying to get out of debt. Teaching your children about the concept of creating a spending plan will be a valuable financial tool for them in the future.
3. Post Your Plan and Update Weekly
As you incur expenses, track them directly in your plan, in a weekly tracking form, or on your excel spreadsheet. Review with your family each week. Bring the family to the table and show them where you’ve kept to the plan and where adjustments need to be made.
Get consensus on changes whenever possible or it may end up being detrimental to your overall success. For example, if you’ve gone over the budget for food and the only place to take from is a planned movie night with the kids, you’ll need to explain fully why that movie night is on hold. You can come up with a creative alternative that won’t cost money, but will still provide your family with entertainment and enjoyment. If the kids protest too much, you may end up feeling guilty and indulge them when you can’t afford it.
4. Balance Your Checkbook
At the beginning of the month, make sure you’ve balanced your checkbook and have an accurate accounting of all checks, debit card withdrawals, and bills that have been paid. If something is outstanding make sure it’s accounted for properly, so you know the exact balance of your accounts.
Related: Good Money Habits
5. File All Paperwork/Receipts
If you haven’t filed all paperwork left over from the previous month, take the time before the new month gets started and file all remaining paperwork. Having a clutter free environment will help you maintain your planning and budgeting goals.
6. Congratulate Yourself
Give yourself credit for developing your monthly spending plan. It takes the effort to do this every month, and you should be proud of what you’re accomplishing. Each month recognize the good work you and your family is doing to get out of debt, live according to your plan, and improve your financial situation.
Creating a monthly and annual spending plan takes time, effort and commitment. If this is your first time, know the process is the hardest and takes the most time the first few times. It gets easier and less time-consuming the more you practice.
If you’re feeling resistant to doing a spending plan, ask yourself, “Is my money worth my time and effort?” Only you can decide.