Reduce Your Money Angst with a Spending Plan

Do you ever wonder where all your money goes?

If so, you’re not alone. Most of us have some unaccounted-for “slush” in our budget. It can be easy to let things slide, particularly if you are fortunate enough to have a bit of a cushion. But not having a spending plan can prevent you from making the most of your money.

The word “budget” has a rather unpleasant connotation, drawing up images of scrimping and deprivation. Many people avoid tracking their expenses because they fear being confronted with their actual spending, and dread the guilt they will feel if they don’t cut back.

But there’s a better way of looking at it. Budgeting is not about taking money away, but ensuring that you can have what you really want. Money is finite, and budgeting is all about trade-offs. Spending money in one area will prevent you from using it elsewhere.

So why not consider all of your spending and decide what is really important to you? Would you rather dine out regularly or save up for a big vacation? Would you rather fund your child’s college or retire early?

We all have a different capacity for discretionary spending, and we all have different priorities. There is no right or wrong. But you need to know where your money goes to give yourself the best chance of meeting your goals.

In order to create a budget, you need to know your current spending. Recurring items like a mortgage or utility payments are relatively easy to calculate, but others, such as groceries and entertainment, may fluctuate substantially.

Personal finance tools can be a great help in tracking spending, and there are many software programs to choose from.  Investor Junkie  has reviewed and compared a number of them to help you get started.

All these tools take a bit of work to set up and maintain, but taking charge of your budget could have big payoffs.  Once you understand your expenses, you can make educated decisions about how to spend your money in a way that is most meaningful for you.