Develop a Spending Plan

Setup a spending plan to spend whatever is left over after the essentials in your life are taken care of. Those essentials must include a saving plan.

Setting up a budget is akin to starting a diet, so we're not going to set up a budget here. Instead, we're going to set up a spending plan that allows you to spend freely whatever is left over after the essentials in your life are taken care of. However, those essentials must include a savings plan. Saving and investing must become as essential as heat and electricity. Spending plans are very individual because an item such as gym membership may seem frivolous to one person and absolutely essential for another.

Let's begin by reviewing your cash flow. Hopefully, you have spent some time wading through it and really have a handle on where you are spending your money each month. These areas are your fixed costs. There is no way to get around them immediately. Maybe you can refinance your mortgage and get a lower mortgage rate. Maybe you can share your apartment with a roommate to lower your rent.

However, the basics in your life are the price you pay for your lifestyle. So, unless you are willing to move, the fixed costs are what you have to work with for now. However, once we get beyond the rent/mortgage and car payment, there are areas where you can make small changes and reap big rewards in savings.