How to create a spending plan in 6 steps

By Parasolla | Updated on June 13, 2022

How to create a spending a plan in 6 steps.

Managing money is one of the most important skills in your life as it can improve your financial situation and give you more control over your money.


In this article, we are going to talk about one of the most important topics about money, which is “How to create a spending plan using 6 essential steps”

1. Calculate your income 

The first step to making an appropriate spending plan is to calculate your income sources. So, you should collect all the money that you get every month to be able to make an accurate plan.


If you have a yearly income and you want to make a monthly spending plan, you can divide it into 12 parts to know your approximate monthly income and build your plan depending on that.


Your duty in this step is to calculate all the money that you get by the end of every month without cutting any amount of money. After that, move to the next step.

2. Calculate your monthly payments

The first thing you must consider before spending your money is to calculate the necessary monthly payments that you must pay every month such as house rent utility bills and subscriptions. And allocate money for that.

Allocating money for your monthly payments will save you money and let you avoid forgetting anything. So, you will not get surprised later that you should pay for something you didn’t consider.

3. Make a list of your essential spending

After you calculated your monthly income and payments, it is time to calculate the amount of money you need to spend throughout the month on essential things.

When we talk about essential things, we mean the things you need to buy to leave such as food, clothes, and transportation. 


First of all, you should know how much did you spend last on those things to get a general overview of the approximate money you spend every month. After that, you can check your list to take unimportant things out. 


If you can’t make an accurate list, you can create some approximate numbers to analyze your situation. After that, you can make a new list of your essential spending for the next month depending on a professional plan.

4. Make a plan for wants

Making a plan for your essential spending doesn’t mean that you shouldn’t buy things you want or do things you love. It is the opposite, the goal of making sending money is to make a plan to let you buy whatever you want and save money at the same time.


After making a plan for monthly payments and essential expenses. You should make a plan for things you enjoy buying. For example, you can allocate money to spend on weekends. 

So, you should make a list of things you would like to buy throughout the month but make sure you don’t spend your money on worthless things.

5. Make a budget to spend in emergencies

Emergencies are one of the most important aspects you need to consider when you make a spending plan to protect yourself from debts. Also emergency budget should always be ready to help you in bad situations.

There is no constant amount of money that can save you in all bad situations but having a good amount of money to help you in this situation is necessary.

You can usually make an emergency budget by saving the amount of money every month. As a result, you can use it for emergencies and you can invest that money at the same time.

6. Evaluate your spending plan

There is no constant perfect plan in the world. So, you should always update your plan and develop it to get better results. 

The best way to do that is to make a table in Microsoft Excel to calculate your all monthly expenses and analyze them by the end of every month. In this way, you will always improve your spending plan and get better results.

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