Creating a Spending Plan

What is a Spending Plan?

A spending plan is similar to a budget. A spending plan allows you to determine what you want and need and how your income can be distributed to afford the various expenses. Creating a spending plan will allow you to effectively manage your finances and determine how best to spend your money.

Getting Started

Here are the steps you should follow to develop your spending plan:

  1. Decide on a time frame - For students who receive financial aid, income is likely received on a semester basis. However, most bills are paid monthly. Creating a constructive time frame will make it easier for you to calculate the timing of your income and expenses so you can plan expense payment timing, whether per semester or per month.
  2. List all your income - It is important to understand all sources of income. Assessing all your sources of revenue will give you a better understanding of what your budget is and what you can financially afford each spending plan period.
  3. Anticipate your expenses - Once you understand all sources of income, review how your money will be spent. Create a list of your expenditures, whether per semester or per month. This will allow you to better control your spending as you pay off your direct and indirect student costs.
  4. Evaluate your plan - Subtract your total expenses from your total income to determine whether it will be necessary for you to find additional sources of income to cover any remaining expenses.

Total Income

Less Total Expenses

Net Income (Loss)

Tracking Your Income and Expenses

To make sure your current expenses are aligned with your spending plan, it is important to track your spending plan over the course of the designated time frame. The spending plan should be modified when necessary.

Fixed Expenses vs. Flexible Expenses

Fixed expenses include costs that need to be included in your monthly spending plan and generally won’t change. These expenses may include tuition, books, rent, etc.

Flexible expenses cover other necessities such as food and transportation but also discretionary expenses like entertainment. These expenses can vary month to month.

Understanding the difference between fixed versus flexible expenses and maintaining a good balance between the two is important.

Reduce Your Spending

An effective way to make sure you are meeting the requirements of your spending plan is to reduce spending wherever possible. Certain categories, such as clothes, transportation, and food are relatively flexible expenses that can be modified to lower your overall monthly spending. By actively seeking more affordable substitutes in these categories, you can ensure you will meet all your financial goals.

Consider a Savings Plan

As part of your spending plan, consider amounts that can be saved each month for unknown or unplanned costs. Saving $20 or more a month will allow you to create a financial safety net and avoid negative impacts to your spending plan when unplanned car maintenance, housing issues, or other expenses arise.

Useful Tools

There are various online tools designed to give you a simple way to create a spending plan and track your spending. The following are some examples of free apps and websites:

  • Review information on CashCourse – which includes customizable financial tools such as worksheets, a Budget Wizard, quizzes, and calculators.
  • Use a Budget app such as Everydollar or Goodbudget.
  • Download the Spending Plan Template to create a financial plan and manage ongoing expenses.