A spending plan or budget is a plan for spending and saving family resources to meet identified goals.
What is the type of expense?
• Fixed expenses occur on a predetermined schedule and are for a set amount (such as a car payment or rent).
• Variable or flexible expenses usually occur on a predetermined schedule, but may change in amount (such as a cell phone or utility bill).
• Discretionary expenses are ones that are totally up to you (such as entertainment or eating out).
Organizing your cash flow
• Income – taxes – expenses = surplus or deficit
• A surplus is money that can be saved, used to pay down debt, or "put to work" toward some other goal.
• A deficit means you are spending more than you make; this often occurs when you use debt like credit cards for ordinary expenses. In this instance, it is necessary either to increase income or reduce debt.
Prioritizing Your Expenses
• Consider the consequences of avoiding that expense. What will be the results?
• Missing payments on housing, basic utilities, your auto loan, and other debt can result in penalties, foreclosure, repossession, shutoff notices, etc.
• Going out to eat, playing golf, and buying things you don't really need can probably be avoided when times are tough.