October 5, 2005

A spending plan puts you in control of your money

A spending plan--sometimes called a budget--can help you balance expenses with income. It's important in any household and at any income level because it helps people make good choices with their money.

With a spending plan, family members in a household may increase their chance of making payments on time; deciding what they can and cannot afford; increasing their savings for education, retirement, large purchases, or unexpected expenses; preventing or reducing impulse or over-spending; and eliminating or reducing debts and loan balances.

There is no "magic" to a spending plan. It won't change the amount of income in a month, make you save more money than you spend or prevent a financial crisis. A spending plan is a tool that puts you in control of your money to meet family needs and wants, as well as to reach family goals. Setting up a spending plan takes some preparation, and following the plan takes determination. To be successful, all family members should be involved.

A good first step is to critically examine current spending patterns to see if these patterns match family goals. One of the benefits of understanding spending patterns is preventing problems of overspending. Overspending happens when there is no tracking of how much money is coming in and how much money is going out of a household.

• You respond to social pressure or try to keep up with the Joneses. People may feel the need to purchase things that give the appearance of higher than actual economic status. Buying out of habit rather than need is similar to this response.

• You desire to get a bargain or like getting a good deal. Often when people purchase items on sale, they avoid comparison shopping for an item for which they may have no need.

• You lack resistance to the pressure from salespeople and/or believe all of the advertisements. High pressure sales tactics frequently convince people to buy things that they do not want or need. This includes buying impulsively from store and door-door sales people, telephone solicitors, television/radio/mail offers, and the Internet. These offers prevent consumers from comparison shopping and often getting a better buy.

• You desire to fulfill an emotion that may include eliminating guilt by buying things for others especially children. This would include using shopping as a way to deal with feelings of depression, sadness, or anger; as well as making purchases as a way to show love and kindness to others.

If you find yourself in any of these descriptors and want to make a change, making a spending plan can help. A spending plan will show how much money you have, where it needs to go to meet your needs and wants and when you will be able to reach your goals. A spending plan puts you in control.

(Shirley Anderson-Porisch is a family resource management educator with the University of Minnesota Extension Service Regional Center, Marshall.)

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URL: http:// www.extension.umn.edu/extensionnews/2005/spendingplan.html  This page was updated Oct. 5, 2005 .
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