• Philip Stratton

LESSON 14: Let's Create A Plan

Some people don't like the word "budget" because it denotes restriction, limitation, or confinement. A better name might be one that implies permission to spend money, like "spend plan". Make up whatever name helps you take that step towards creating a plan for your money. You could call it FRED (Funds Required for Every Day) and ask yourself "How's FRED doing today? I should check on FRED to make sure everything is okay". The key component is intentionality. Having a plan is the best way of ensuring your hard earned income goes towards the outcome you desire. To paraphrase Terence McKenna "If you don't have a plan for your money, your money becomes part of someone else's plan."


If you are a salaried worker, this is pretty easy. If you are hourly, maybe your paychecks have some variation but stay relatively consistent. And then maybe your pay has tremendous swings because your industry experiences seasonal ups and downs or is based on the job performed such as commission or gig work. However you are paid, determine what is likely the base amount you can expect each month.


Take your bank and credit card statements from the past few months (download them if you don't already have hard copies) and review how you are spending your money each month. Group food purchases together. Housing costs. Clothing purchases. Entertainment. Subscriptions. Keep going and assign a category to each transaction. Doing this review for several months provides you with data regarding how you actually spend your money. After you have finished your reviews, total each category and divide by the number of months reviewed to calculate a monthly average. Here are some examples of common categories. You may not use all of these or may have others not listed:





Rent Insurance Maintenance Property Taxes Utilities Home Internet Trash collection Lawn care Decorations

Cable Streaming services Books Games Movies Fun Activities Subscriptions Time with friends

Emergency Fund Vacation Fund New Car Fund College Fund Investments




Loan payment(s) Fuel Maintenance Insurance Registration Inspections Ride Share

Regular clothing Fitness clothes Business attire Formal attire

Church offering Cash donations Various fundraisers




Groceries Restaurants Snacks Dessert

Birthdays Christmas/Holidays Other

​Medical expenses Dental expenses Vision expenses Medications




​Haircuts Nails

Fees Supplies

Pet food Veterinary care Supplies




Book fees Tuition Activities Meals Loan payment(s)

Cellphone Cellular plans

Data plans

Pocket money Petty cash


Now add a monthly amount, such as the average calculated from the exercise above, next to each category that applies to your household. If a particular expense is paid less often than monthly (ie. annually), then break that cost into a monthly value to place next to that category. (example: if your Amazon Prime subscription is $139 per year, enter $11.60 per month within the Entertainment/Subscriptions category).

Total the amounts entered next to all of your categories.

Is the total less than your monthly income total?

Are you meeting your savings goals?

Are you paying off debt quick enough?

Do you feel comfortable with your retirement trajectory?

If you've answered "no" to any of these questions, it's time to take the next step.


Take your list of categories and start labeling them with a priority number. If you are married or have a partner that shares in your living expenses, have them do the same using a separate list. Yours and their priority ratings will likely look different. Talk through the differences and develop a final prioritized list you both have contributed into.


Sort the list by priority. Start a running tally of your categories to determine what your income can support. Draw a line once your expenses reach, without exceeding, your monthly income total. The items above the line are your regular monthly funded categories. They all may not be actual monthly expenses. Some may be money that gets set aside towards a future expense. The items below the line are categories that are funded only when additional money comes in, such as a bonus received, overtime offered, a side job performed, etc., or are taken away from FRED because you realize they aren't very important to you and don't need to be part of your plan. Maybe you even realize they were part of someone else's plan that got added because you didn't have a plan. Now is the time to empower FRED to do your bidding.


If you find the line is being drawn before basic needs are being met, you might need to take a hard look at The Big 4 categories (see lessons 10-13) and make decisions around your housing situation, the vehicle(s) you drive, and the food choices you make. Your income should also be analyzed. Asking for a raise, seeking a higher paying position, requesting overtime hours, or taking a second job for a while may be options to aid in meeting your goals.

There are many whose income barely covers basic housing, food and clothing. But there are also many who struggle financially because they simply don't understand their own spending. Reviewing, prioritizing, and eliminating non-value-added expenses might be all that's needed to completely change your financial future and reduce your financial headaches.

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Notes: Becoming Minimalist blog post: https://www.becomingminimalist.com/payoffdebt/ Simon Sinek’s TED Talk: https://www.ted.com/talks/simon_sinek_how_great_leaders_inspire_action?language=en&utm_camp

Links: Your Money or Your Life: https://www.amazon.com/dp/0143115766/ref=cm_sw_r_tw_dp_098HSZ0FXRFJNXEQVPNF Casey Neistat video: https://www.youtube.com/watch?v=ROfBLx6bLZI&t=1s CNBC article: https://

Links to references mentioned: Casey Neistat's video: Rich or Poor Next Level Life's video: Making Money VS Saving Money (Which Is MORE IMPORTANT?) CNBC article: Here’s a budget breakdown of a couple