Four Reasons Why You Need a Spending Plan
You wouldn’t start a house renovation without a plan, or set out on a round the world trip without having a plan. Money is no different. You need to have a plan in order to get to where you want to be financially. If you’re still unsure as to whether you should take the time to make a spending plan then here are 4 reasons why you should:
1. Know Where Your Money Is Going
We spend so many years of our life working. If you’re lucky then you’ll love your job but for many, they work in order to make money so that can have a life outside of work. When it takes hard work to bring money in then you need to take the time to understand your finances. Take a moment to sit down and write down all the sources of income you have and then all your expenditure. Once you have a clear idea where you’re money is going each month you can make a plan on how to improve your finances.
2. Make The Most Of The Money You Have Coming in
How many of us would love a pay rise? I know I would!! You can effectively give yourself a pay rise by making sure that the money you do have coming in isn’t wasted. That your hard earned cash is working as hard as it can for you. When was the last time you checked if you were on the best phone tariff, energy tariff, etc? You often don’t get rewarded for loyalty nowadays. For example, when your house insurance is coming up for renewal, make sure you check to see if you’ve got the best deal.
There are fantastic price comparison sites that you can type your details into and they’ll come back with the best deals for you. When you have a busy life, it might seem like a bit of a hassle but it could save you hundreds (maybe even thousands) a year. It’s well worth doing.
3. Avoid Debt or Help You Get Out Of Debt
If you know how much money you have coming in, then you can budget that money. You’ll be able to make sure you’re not spending more than you have. Debt can sneak up on you so easily when you don’t have a spending plan. If you find yourself in a position where you are in debt then create a spending plan so you can create a plan of action to get out of debt. That might include debt consolidation, balance transfers, etc.
4. Plan For The Future
There’s two parts to planning for your future. The first is to plan for your immediate future. Unexpected things happen in life so set money aside for emergencies. Ideally we should all have enough money set aside that would cover our spending for between 3 to 6 months. Should you find yourself out of work, this would provide you with a safety net to cover your bills.
The second is to plan for your long term future. Do you want to buy a house? When are you planning to retire? These are important areas to consider. The earlier you start saving for a house the earlier you will be able to afford one. The earlier you pay into a pension, the better your pension pot will be when you retire.
Hopefully this points will have given you some food for thought. A spending plan is something we should all have. If you have any tips or comments then please leave them in the comments section below.