By Selena Garrison.
We acknowledge that many families facing financial hardship due to COVID-19 are unable to save money right now. We hope the information provided in this series will serve as a helpful resource, during National Financial Capability Month, for Personal Finance Managers to enhance the money management skills of families who have discretionary income.
Throughout this financial capability series, we have covered helping clients:
(1) track their spending
(2) identify how much money they have coming in
(3) distinguish between fixed and flexible expenses
(4) determine whether they are living on what they make
(5) set SMART financial goals.
Once these are in place, it is time to finalize the spending plan… and stick to it!
The spending plans needs to take into consideration how your client is currently spending his or her money, how much money they have coming in, which expenses are fixed versus flexible, their current surplus or deficit, and their financial goals. You can help your client use a simple Excel spreadsheet to help them map out their spending plan. There are also free online templates and budgeting apps that can be helpful.
It is important to remember that the spending plan is not a one-time fixed strategy that can’t or won’t be changed. In reality, goals, needs, and life situations change, and the spending plan has to be flexible to adjust to those changes. The spending plan will potentially need to be adjusted each month to account for fluctuations in income and expenses. For instance, utilities fluctuate month-to-month and may be considerably higher in some parts of the year than others. Your clients need to be prepared for those changes and adjust their spending plans accordingly.
In order to make the spending plan effective, it is important that clients continue tracking their income and expenses and regularly check in with their finances to make sure they are on track with their plan. Have them set up a time each week where they compare their actual spending to their planned spending and determine if they need to make any adjustments.
If they notice part-way through the month that they are spending more than they planned to and are on track to blow their budget, they can go back to their tracked expenses and see where they may be able to cut back for the remainder of the month. Keeping track in this manner will allow them to quickly course-correct and get back in line with their spending plan instead of waiting too long to make adjustments to account for their overspending. Additionally, this method will allow them to see if there are additional areas where they can adjust in order to save toward their goals.
Image by Wokandapix from Pixabay
