Six Steps to Create Your Personal Spending Plan

Carl Holubowich, CFP®
4 min readApr 7, 2021


Good financial planning begins with a basic household spending plan. Creating a plan helps you understand where your money is going each month and allows you to develop a strategy for saving. By having a plan in place, you can easily track your spending, savings, and more easily monitor and reach your financial goals. Here are some simple steps to create and maintain a household budget.

Step 1: Determine what you need vs. what you want

Try to create a list of things you need versus those that aren’t necessary, but you would like to have. For instance, if you need to drive to work every day, owning a car probably counts as a need. With a large part of the workforce now working remotely from home for the time being, internet access and a cell phone would also be necessary expenses. A monthly music subscription, however, may count as a want. Here is a short list of items that would fall into these two categories:


· Food

· Basic clothing

· Transportation

· Shelter

· Medical insurance

· Utilities


· Eating out and entertainment

· Travel/vacation

· Hobbies

· Electronic gadgets

· Gifts

Remember, while even items like groceries need to be factored into your budget, they are NOT a fixed cost. When looking at your non-essential expenses, rank them in order of what’s most important to you. Prioritizing them allows you to adjust when and if you need to. If taking a vacation is higher up on your list than having the latest iPhone, the decision on where to spend your money becomes a bit easier.

Step 2: Set your goals

Start setting financial goals by asking yourself these questions:

· What are my values?

· What do I hope to accomplish?

· Where do I see myself financially when I am in my twenties, thirties, forties, etc.?

Asking these questions will help you visualize a lifetime full of successes and accomplishments on which you can build your short and long-term goals. Here are a few examples:

· Buy a home

· Go to college

· Buy a car

· Live on my own

· Travel or vacation

The list above would be considered general goals, but well-written personal and financial goals should be SMART:

· Specific — “I want to save $5,000 for a down payment to buy a house.”

· Measurable — You can easily determine if the goal was completed or not.

· Achievable — A student working part-time is not likely to be able to afford a new car every couple of years.

· Relevant — It improves your life in some way.

· Time-bound — “I want to pay off my credit card within the next 18 months.”

Remember, your goals don’t have to be set in stone, but identifying your priorities before you start planning will help. For example, it may be easier to cut spending if you know your short-term goal is to reduce credit card debt.

Step 3: Calculate your income

Determine exactly how much money you have coming in. Take a look at one of your pay stubs and see how much you receive each month after taxes and payments for items like insurance. If you have any other income from other sources, such as stocks or a rental property, be sure to include that in your monthly total as well.

What happens if you don’t make the same amount of money every paycheck? If that’s you, you aren’t alone. Plenty of people work hourly or commission-based jobs or have side gigs where their monthly income can vary. If you have variable income, use your lowest monthly take-home pay estimate. To find this number, check out your pay stubs from the last year and find the lowest one in the bunch.

Step 4: Track your fixed and variable expenses

There are a few ways to do this, but I find it’s always easier to first find out where your money currently goes, rather than projecting what it might look like. If you use credit cards for a majority of your expenses, most of them produce an annual report detailing everything you spent during the past year. It also helps capture those “one-time” expenses that often come up more often than we think during the year.

Technology can make this process significantly easier. There are multiple apps that can help you plan and track your expenses. Personally, I use and love Mint, but Nerdwallet has a great list of other options to try. The key is using one that works best for your situation.

Step 5: Create your monthly spending plan

Once you have a good handle on your expenses, you can develop a monthly budget of how much to spend on various categories. Make sure you pay yourself first by allocating to savings goals like retirement and an emergency fund, then use the rest for bills and other costs.

Step 6: Regularly review your plan and compare to what you actually spent

It’s important that you review your plan on a regular basis to be sure you are staying on track. You can also compare your monthly expenses to other people with similar lifestyles and habits. Few elements of your budget are set in stone: You may get a raise, your expenses may increase, or you may have reached your goal and want to plan for a new one. Whatever the reason, keep checking in with your budget following the steps above.

A spending plan is a “living document” that will change with your needs and situation. Life happens. And your spending plan should be flexible enough to change with whatever comes your way.



Carl Holubowich, CFP®

Principal @ Armstrong Fleming & Moore, Inc. Securities thru Commonwealth Financial Network, member Terms of Use