Beginner’s Guide: Creating a Spending Plan

spending plan

Living on your own for the first time is exciting. You finally get to make your own choices about what you pay for, what you don’t, how you manage your kitchen, and more.

However, being a first-time renter also involves controlling your spending. It’s too easy to buy things, subscribe to services, eat out, and incur dozens of other expenses. It can spiral out of control quickly.

To keep things under control, you need a spending plan. It may sound restrictive but look at it this way. Having financial peace of mind will give you the ability to have more fun with spending money because you’re not living in fear of accidentally spending the rent.

Here’s how to create a spending plan you can live with.

Write Down Your Essentials

There are certain things you need even if you’re taking Lyft to work and eating peanut butter sandwiches every day. These should be top priorities in your spending plan.

Here are some examples:

  • Rent
  • Electric bill
  • Water bill
  • Home gas bill
  • A basic low-cost phone service, perhaps prepaid
  • Groceries

These are the things you need to simply live. Everything else can go if it needs to. There are always other options.

Knowing your real essential bills can help you realize that life is more affordable than you think. If you know what the essentials are, you can make sure to pay those no matter what.

Record Second-Tier Essentials

Second-tier essentials are things that many people call essentials but aren’t necessary to survive. They are financial responsibilities and things that make life a lot better when you have them.

Your second-tier essentials will depend on your lifestyle, but may include:

  • School loans
  • Savings for emergencies and retirement
  • A car, car insurance, and gasoline
  • Renter’s insurance
  • Internet access
  • Netflix, Hulu, or other television or entertainment
  • A cell phone

List “Nice to Have Expenses”

“Nice to have” expenses are things you enjoy, but can be the first to go when money gets tight. They include entertainment options, subscriptions, and more.

Some “nice to have” expenses you might budget for are:

  • Going out with friends
  • Magazine or online subscriptions
  • Gym memberships
  • Extra channels on television
  • Eating out
  • Shopping for clothes
  • Apartment decor

Once you have your expenses prioritized into essentials, second-tier essentials, and “nice to have,” you’re ready to set up your spending plan.

Creating the Spending Plan

At the top of a spreadsheet or sheet of paper, record your monthly income. Below that, list your essentials, the date they are due, and how much is due.

You probably have some money left over. Now it’s time to add in the appropriate second-tier essentials. If you hit your monthly income in the process, you know exactly what you can currently afford.

If you still have money in the budget, add in some “nice to have” expenses. By tracking how much money you spend – or better yet, using cash you set aside in advance – you can enjoy these activities without overspending.

If you find that your income can’t accommodate everything you need or want, you’ll want to get creative about increasing your income. Many people have side hustles that can put extra money in your pocket even if you’re working full-time.

Ready for your first place and interested in renting in the Fort Wayne area? We can help. Contact us today!

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