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Now you’ll need to do some serious thinking about your goals. What are your priorities and those of your family? What do you dream about? How will you achieve your goals given the restrictions of your income? Now that you know where your money is going each month you can create a spending plan to help you realize your goals – whatever they might be.
For example, if you have incurred debts your first goal might (should) be to pay them off. Alternately, you might want to increase your retirement savings. On a more short-term basis do you want the occasional weekend camping trip or a family vacation? How about creating a fund that would be a cushion against unexpected emergencies like a serious illness, an auto accident or unemployment? Most financial experts say you should have an emergency fund equivalent to at least six months of living expenses. If this sounds too daunting try for at least three.
A reflection of your priorities
The bottom line is that your spending plan should reflect your priorities. If your top priority is to pay off your debt you should probably have a plan where you are spending at least 10% less than you earn so that you can use the extra money to pay down your debts. But this is an area where you don’t want to have a spending plan that is so draconian even Uncle Scrooge would give up on it after just a few weeks. In other words, it must be realistic. An article published on GetRichSlowly.org revealed that some people fail at their budgets because they failed to make it realistic. Try not to underestimate your expenses so you can successfully follow your budget.
Mistakes will be made
Most people make mistakes when creating a spending plan and it’s likely that you won’t be an exception to this. But if you create a plan that does reflect your lifestyle and your goals you are more likely to adhere to it. If you do make mistakes, don’t despair. Just go back to your plan, make the necessary adjustments and move on. Even though creating a budget and a spending plan can be a tough task the rewards can be amazing. You’ll have your spending under control, you’ll be working towards your most important goals in life and you can relax knowing that you never again will run out of money before you run out of month.