Instead of focusing on cutting spending or restricting yourself which is often associated with budgeting, a cash flow and spending plan empowers you to understand where your money is coming from and where it goes each month, so you can take control and make more intentional decisions.
Cash Flow Basics
What remains after taxes and deductions is your net income; the amount deposited into your bank account each month. A spending plan should always be based on this amount.
The 50/30/20 Baseline
It is not uncommon for individuals to be spending close to 80% of their income on must-haves alone, particularly in higher cost-of-living areas. In these situations, the 50/30/20 framework may feel out of reach in the short term. However, the goal is to gradually move closer to this baseline over time.
Adjusting Your Spending Plan Over Time
This can include reviewing your spending plan regularly to ensure it still reflects your current situation, updating your financial goals as your stage of life changes, and adjusting spending categories as your priorities shift. It also means allowing flexibility so your financial plan can adapt to your life.
