University of Illinois Extension

Setting Spending Priorities

Making a Spending Plan

A spending plan is an effective tool to help you get the most of your money. It is more important when you have a sudden change in your income. A spending plan helps you:

  1. Make decisions about how to spend your money
  2. Provide for needs before wants
  3. Match your spending to your current income
  4. Prevent family arguments over money

Using the Monthly Spending Plan worksheet can help you set up a spending plan for your current income. You can see what changes are needed by comparing your income and planned expenses before and after your current situation.

Step 1 – Your Income

Total up your current family income sources. Include income from other family members if it is used for family expenses. Use the take-home amount, or what you actually have to spend after deductions.

Which of these income sources, do you receive income?

  • Earnings from employed family members
  • Unemployment Compensation
  • Withdrawal from savings
  • Tips or commissions
  • Interest or dividends
  • Social Security
  • Child support or alimony
  • Public assistance
  • Veterans benefits

Using the spending plan worksheet, list your income before it was reduced and the adjusted amount.

Step 2 – Your Monthly Expenses

If you had a spending plan before your income was reduced, you know how much you were spending for monthly expenses. If not, use old records, canceled checks, bills and receipts to figure out how much you spent on the following categories.

  • Housing — mortgage or rent payments, property taxes, insurance
  • Utilities — electricity, gas, oil, phone, water, garbage, cable TV
  • Food — groceries, eating out, school lunches
  • Transportation — gas, car repairs and maintenance, parking, bus, taxi fares
  • Medical Care — doctor, dentist, clinic, hospital, medicine, glasses
  • Credit Payments — car payments, installment loans, credit cards, charge accounts
  • Insurance — health, life, property, car, disability
  • Household and Maintenance — repairs, cleaning and laundry supplies, paper supplies, towels, equipment
  • Clothing and Personal Care — new clothing purchases, dry cleaning, hair care, cosmetics, toiletries
  • Education and Recreation — books, subscriptions, magazines, newspapers, lessons, tuition, hobbies, club dues, sports, pet expenses, entertainment, vacation, alcohol, tobacco
  • Miscellaneous — child care, gifts, contributions, personal allowances, child support

Remember, not all of your expenses are monthly. Property taxes, insurance premiums, birthdays, and holiday gifts come once or twice a year. It’s easy to forget about them and then not have the money to pay for them. Use Occasional and Seasonal Expenses to help you identify and anticipate these expenses. You will need to set aside some money in your monthly spending plan to meet these occasional costs.

As you think about what you were spending and try to plan how much you can now spend, ask these questions:

  1. Which expenses are essential to the family’s well-being?
  2. Which expenses have the highest priority? Deciding Which Bills to Pay First can help you determine this.
  3. Which areas can be reduced to keep family spending within its income?
  4. How much can you afford to spend in each category?

Adjust the amounts you spend in each expense category and enter the new amount in the column labeled “Adjusted Amount” on the spending plan worksheet. To practice this skill, visit More for Your Money – Debt Management section at  and help the Jones family with their expenses.

Step 3 – Balance Income and Expenses

Total up your expenses and compare them to your current total income. When your income is reduced, it may be difficult to stay within your income. What can you do if your expenses are more than your income?

  1. Cut spending. Review Strategies for Spending Less for suggestions, particularly for reducing flexible expenses.
  2. Increase your income. What are the possibilities for part-time or temporary work to help supplement your income? Use your non-dollar resources, too. Check out Bartering.
  3. Look at your other assets. What savings, investments or property do you have that could be used or converted to cash to meet expenses? Refer to Making the Most of What You Have. Keep in mind that borrowing and using savings may be only temporary solutions.
  4. Reduce your fixed expenses. If too much of your income is going to fixed expenses such as housing or debt payments, there may not be enough money left to cover your other living expenses. You may need to refinance your loans, move to lower-cost housing, or surrender the property to your creditor to get out from under some of your debt. Review Talking With Creditors and Keeping a Roof Overhead.
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