At our recent Financial Training Day, Dave Jackson and Kevin Slater explained how to create a spending plan. The following summary is by Kevin. In the book of Matthew, Jesus says, "Where your treasure is, there your heart will be also." Your heart follows your money, so direct your treasure carefully.  For most people, income will vary over a lifetime; sometimes there is a great flood, and sometimes barely a trickle. Unfortunately, very few people have a plan for their spending. On the contrary, most tend to save very little (less than 4 percent), give relatively little, and spend more than they actually earn by using debt.  When using credit cards, people spend 12 to 18 percent more and lose touch between spending and how much they actually have to spend. Instead, determine in advance how your money will be allocated. Break it down into four different groups: 1) Giving, 2) Saving, 3) Fixed Expenses--like rent/mortgage, utilities, cell phone, insurance, etc. 4) Variable Expenses--like food, entertainment, books, gas, etc. Variable expenses includes what you can control every month. It's the category that gets people in trouble. Dave Jackson developed a great system to help solve this problem: Rather than setting arbitrary numbers for all of the component parts (for example, asking how much will we spend on Starbucks this month?)...

1. Group all variable expenses together.
2. Create a separate account at your bank that will be used for these expenses only. At the beginning of the month deposit your "allowance" into the account.
3. Throughout the month, pay for your variable expenses using cash withdrawn from the account, or a debit card tied to it. When the money is gone, stop spending!
In order for this plan to work, two pieces are absolutely necessary: 1) using a completely separate account so the funds are not mixed, and 2) using cash or a debit card. Mixing in a credit card will undermine the whole concept. This system is realistic and gives you a much better sense of how much you are spending as you spend it--rather than after the money is already gone.