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Once you've thought about your goals and priorities, examined your attitude towards money, put together a balance sheet, and done a cash flow analysis, your next step is to take all you've learned and put together a spending plan that works for you.

You have a certain amount of money available to you. You can spend it any way you choose. What are the choices that are best for you? How do you plan your spending so that it is in line with your goals and priorities?

Time Frame

Think about how to build your plan. For most people, a plan built around their pay period may work best. It could be weekly, or every two weeks, or twice a month, or monthly. If you have two incomes with two different time frames, then it usually works best to center the plan around the larger check. Use the "Cash Flow" worksheet to build your plan.

Fixed and Variable Expenses

Payments you are committed to, such as taxes, rent, mortgage payments, loan payments and insurance, are called fixed expenses. In reality, however, few expenses are set in stone. You can move to a cheaper apartment or sell your house and buy one that's less expensive. You can raise the deductible on your insurance.

Expenses you have significant control over or which change from month to month are called variable expenses. These are things such as food (you can avoid eating out), utilities (turn off the lights), clothing (wear it out) and gasoline (carpool).

SUGGESTION: Focus on variable expenses first when you are developing your spending plan.

The first questions to ask:

• Do you pay yourself first? Do you set aside money for savings first, and spend what's left? That's the best approach to a spending plan.
• How much of your money is spent on convenience foods and eating out?
• Do you buy your clothes at outlets, wait for sales, or do you pay full retail prices? Do you need all the clothes you buy?
• Can you save money on vacations by swapping houses with someone or staying local?
• Can you live without premium cable or satellite TV?
• If you have a recreational activity you regularly pursue, can you do it at off-peak times?

The choices are up to you. It all depends on what you are trying to achieve. If eating out is your favorite thing in life, you should find a way to afford it. If you love clothes, make them a priority. The point is to find out what it is you really want, and focus your resources there. Reduce or eliminate the things that don't mean as much.

Go back to your expense record again. How many of the things you bought were worth it? Aren't there items on that list you can't even remember buying? Or look at your bank statement and try to remember where all the dollars went that you took out of the cash machine. If you don't know, chances are those things weren't that important to you.