How to Set Up a Spending Plan

The word budget feels like a four letter word to some. Just the thought of going through expenses and figuring out how get them all organized is overwhelming. Then there’s all the time involved. Most of us don’t have time to eat a proper lunch, much less figure out a budget. 

Or maybe the idea of a budget seems too rigid and constraining. The free spirit doesn’t want any hard rules about spending money. But everyone needs a budget. Even the free spirit will find her wings quickly clipped when she runs out of cash. 

In truth, a spending plan doesn’t restrict you. When managed properly it sets you free to live the life you want. And it doesn’t have to be time consuming. Here’s a spending plan that can work for everyone.

Simple Budget Spreadsheet

All you need for a budget is a simple spreadsheet. You can use Excel, Open Office or Google Docs. To help you along, here is a simple Google Docs Budget Spreadsheet. What you will do is open the spreadsheet and save it to your own computer by clicking “File” and choosing the download option that works best for you. Once you save it to your own computer, you are ready to go. 

Enter the amount of income in the appropriate box, including all your jobs, side jobs, etc. Enter any interest you earn on accounts or investments in the next line. The spreadsheet will total the income for you automatically. 

The next section will be for your recurring expenses. List each expense following the example of the spreadsheet. Include rent or mortgage, utilities, cable bill, loan payments, kids’ expenses, etc. If you like, break the expenses down into categories that make sense for you. 

Now you need to estimate what your other expenses might be. Things that change month by month, such as groceries, entertainment, etc. Estimate on the high end. If you find them going down over time, you can lower your estimates. Again, the spreadsheet will total it up for you. 


How Much Should Your Expenses Be?

The spreadsheet will also calculate the percentage of your expenses compared with your income. The idea is to keep pecking away at your expenses until your expenses fall below 60% of your income. 

The other 40% should be divided into four categories: 10% for retirement, 10% for long-term savings (retirement), 10% for short-term savings (emergency expenses). The last 10% is all yours to do with as you please. Ideally, you would use that to pay down your credit until you have no monthly credit card bills. Now was that so hard? 


Controlling Your Cash

If you don’t trust yourself to stay within your budget, you could try a cash filing system. A recipe box and index cards work well for this one. Divide the recipe box into 31 days with the index cards, each label with the day of the month. Then divide you remaining cash into each portion of the 31 day file. Let’s say that you have 30 dollars for each divider. At the beginning of the day, you remove the 30 dollars. That is what you have available to spend on that day. Do not take money from another divider until that day has arrived. If you have left over money at the end of the day, put it behind the next day’s index card for tomorrow. For this to work, you must never take from the next day.  

This gives you the feeling of freedom by always putting cash in your pocket. If you put the day’s leftover at the end of the month each time, you’ll see firsthand how much you have to spend towards something special at the end of the month. You can leave the money there or spend it as you please.


Jessica Bosari writes for the money-saving site, The site is devoted to helping people reduce expenses, save money and find great deals. Pay Billeater a visit for more  budgeting and saving tips!

20 thoughts on “How to Set Up a Spending Plan

  1. Forest

    I really like the recipe card box idea…. I have been doing well with a metal budget but really should write something solid down.

    1. Money Funk

      Ya, I think was a really cool idea too. Be neat to see the cash available at the end of the month. πŸ™‚
      As for budgets… I can calculate mentally well, too. But writing a solid budget down… you will probably find more cash in your hands.

  2. Little House

    I’ve been doing great with my budgeting tools but I have to say that I can’t seem to get my bills down to 60% of my income. I’m lucky if I can save 10%. But maybe that’s because I’m budgeting in my debt payments into my monthly budget. If I used only 10% of my budget for debt payments, I don’t think that would cover the car payment, student loan, or credit debt. Perhaps I need to rework some things!

    1. Money Funk

      LOL. I had to calculate all that, too. Currently I am paying 15% towards debt (Student Loan and 2 Personal Loans). I did find an extra 1% to apply towards that payment. As you see I did not include my Car. That is under the 60% income bracket (I was calculating for Single Mom, Rich Mom’s post).

  3. Chris@FeFi

    I like the breakdown given here… love the offered spreadsheet. Conscious spending is my preferred method of budgeting, as allocating down to the penny can get tedious. That recipe box idea is really interesting too – like getting a visual of stealing from the future. πŸ˜‰


    1. Money Funk

      Calculating down to the penny can get tedious. However… last night I calculated a zero based budget. Wasn’t bad at all. My Everything Else category (groceries, entertainment, etc…) might be good if I just take that available money out in cash. It will eliminate the down to the penny, because when my wallet is empty… it’s empty! πŸ˜‰

  4. Derek Sisterhen | Past Due Radio

    I love the simplicity of this approach. I wonder sometimes if we fall of the budgeting bandwagon because we over-complicate the issue.

    I really like the index card recipe box idea. That visual reminder of progress is so powerful – especially if controlling spending has been problematic.

    Now, what do you think would happen if the same number of people living paycheck-to-paycheck in this country (70%) were saving 30-40% of their income? That would be a revolution in this culture!

    1. Money Funk

      Have you seen my spreadsheets??? πŸ˜€ Yes, overly complicated. But I did draft a really simplistic zero based budget last night and am proud to not have overcomplicated the matter. As for the index card idea… I think I would love to make it a game of how much I could keep in there! It’s a great idea.

      Saving 30%-40%… definitely a revolution. Would be nice to see.

  5. Jerry

    My wife and I use a cash system as our insurance we won’t go over our budget each month. It works pretty well. Our miscellaneous spending is where things lead to trouble. Those quick trips to the market and snacks, etc. are killing us.

    1. Money Funk

      Ya, that is a definite killer! I have been subjected to that fault, too. It’s surprising how much those trips add up to cost!

      Cash system is great. And i would probably be all for it, except when i go to the gas station. So convenient to have the debit card at the machine. πŸ™‚ I am glad you and your wife have found a system that works for you!

  6. Everyday Tips

    We really don’t spend much money for things other than necessities. Of course there are some meals out and vacation spending, but outside of that, we spend on what we need. Because of my husband’s job and the expenses he has to incur and be reimbursed for, it makes the waters more murky.

    Therefore, I do not budget as closely as I probably could. Things seems to happen out of the blue all week long. For instance, basketball camp started this week and 2 of my kids had outgrown their shoes. Just had to bite the bullet and spend.

    I should see if I can somehow implement some of the ideas you stated though. It is a great post.

    1. Money Funk

      Ya, I hear that motto, “kids are costly”. LOL. I am trying to deny the clothes shopping coming up soon. But, if you are aware of those things coming then you might consider planning for it, set up a clothing budget or sports budget.

      I know its not always easy, especially with your husband’s job situation. But at times, its good to put the foot down for those ‘things out of the blue’ and take control of it.

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  10. James

    some people react well to baby steps other reach well to jumping into the deep end and just going for it. my suggestion is to really take a look in the mirror and determine who you feel you are and approach your finances the same way. also get a friend or family member involved to help you stay on track. this support system can make all the difference.

  11. Belmont Thornton

    Well I find your blog title very amusing! How can you set a plan for spending money, isn’t is supposed to be random? However, if only people knew the way to control their emotions and their spendings then life would have been like a fairy tale.

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