Healthy spending series: Part 2 - Make a plan and stick to it

Continued from yesterday's post...

2. Make a plan and stick to it

This includes financial planning at all levels, from creating a budget for both spending and saving, always making a shopping list (hence, avoiding impulse buys), and establishing some long-term goals. Let's break it down one-by-one.

• Creating a budget will probably be your first step toward achieving your financial goals. When I was getting out of debt, I had to figure out what I needed to pay no matter what (like rent, utilities, groceries, etc), what I expected to pay for other miscellaneous things (including some fun stuff -- no one wants to live in the stone ages), and how much I'd have left over to contribute to debt. Once I realized how much I should be able to contribute, I sent that same extra $500 a month every month like clockwork, treating it the same as I treated my rent. It was only with planned discipline that I was able to eliminate $9,000 debt in less than a year.
  
  Creating a budget and getting to know it will guide your spending every day. Start with the essentials, and then with the non-essentials, and find out what's left to save. If you're not happy with the amount, adjust your non-essentials. Mint.com provides a nice interface to enter your monthly budget goals and has a reporting feature to show you if you're on pace to meet those goals.
  
  See also my post on the benefits of creating a simple budget.
  
  
• Making a shopping list before you go grocery shopping is important. Or if you're shopping for something else, make sure you know what you're out to get. If you're on a random, just-for-fun shopping trip, establish a spending cap ahead of time.
  
  Avoiding impulse buys is an important part of adhering to your spending goals -- even if you've spotted a good deal. Just because the DVD player is 50% off doesn't mean you need to buy it. After all, do you really need another DVD player around the house? If you hadn't been planning to buy a DVD player, you didn't save 50%, you wasted 50%.
  
  Of course nobody's perfect, so plan ahead and give yourself some leeway. When creating your monthly budget, budget some fluff money that you can use for whatever you want. That way, you can make a few of those irresistible impulse buys without as much guilt -- or at least with more predictability.
  
  
• Establishing long-term goals can be tricky. And I'm certainly not a licensed professional qualified to give you advice on how to save for retirement. If you feel like you need help, seek professional advice, preferably from a fee-only financial planner.
  
  Still, it's important to know the basics: The younger you start saving, the better. And the more you save when you're young, the better. If you're older and haven't started saving, you've got some catching up to do.
  
  Save for things other than retirement, like college and the purchase of a big-ticket item. If you own your car and don't plan on buying one for a few years, start making monthly 'car payments' now into a savings account so you can pay cash when it comes time to buy.
  
  Always keep an eye toward the future; understand the basics; don't invest in anything that you don't understand; know that unexpected things will come whether you like it or not.

Tomorrow on tepom.com, the Healthy Spending Series continues with Part 3: Finding leisure activities with income potential or the ability to further your career.