Step #4: Building a Spending Plan

Everyone who takes on a debt elimination tries to avoid setting up a budget.  They feel it puts too much of a restriction on their lifestyle.  Voluntary adherance to a spending plan is perhaps the most freeing and liberating feeling you can have.  If you are following your spending plan you have no guilt about money that is spent.  You are secure in the knowledge that you finances are under control and you have already planned for the expenses you are now incurring.

The first step in your spending plan goes back to step number 1.  You must now lay out all of your expenses and track the money coming in and going out.  Ideally you should track this over at least 1 month to get a good idea of where every penny is going.  It only takes a moment to write down what you spend on a piece of paper in your pocket.  Then transfer it to balance sheet at night.  It is only when you don't take the extra 5 seconds to do this that it begins mount up and become a task.

During the tracking period you should not use your credit cards at all.  Only debit cards, check and cash should be utilized to make sure you are able to track where your money is going.  Make sure you make all payments on time during this time and as you begin your new spending plan.

This is the beginning of your budget/spending plan.  As you track your spending during the month, you will begin to find items that stand out.  These items will usually come as a surprise and you will begin to gain control of your spending.  Knowledge is power in this case.

You will also find out how much money you actually need to pay off your debt and move your debt acceleration plan forward towards a wealth accumulation plan.  

See you tomorrow.