A Spending (AKA Budgeting) Plan That Actually Works In Real Life

by | Feb 9, 2024

How do you feel when you hear the word budget? Most people we speak with physically recoil, admit they hate it and don’t want to do it, and have other adverse reactions. This makes sense as most often what comes to mind is restriction, not being able to do what you want, and conflict due to how you’re spending your money. However, budgeting doesn’t have to be restrictive or painful and is one of the most important ways to ensure your financial success. Sometimes budgeting doesn’t even require you to know how much you are spending on Starbucks or at bookstores. Budgeting means that you are saving enough for your goals, you spend money intentionally in alignment with your values, and a budget allows you to spend guilt-free. Also, switching the word from budgeting to spending plan sometimes helps the internal recoil and will be used throughout this post. 


Sometimes initiating a spending plan is as simple as setting up automatic transfers to your savings and retirement accounts and spending whatever is left. But most people need to be a bit more intentional about spending and use tools to track their income and expenses. 


Setting up a spending plan is much more than just finding the perfect app or spreadsheet. There is a strategy to maintain a spending plan that works in real life. This strategy is called Flow-Based Spending. It’s a style of spending that doesn’t force judgment on spending (unlike the needs v.s. wants old school method), is based on flow and timing on various expenses, and provides you the control you want.


Here is how you implement a flow-based* spending plan:


Step 1: List all of your fixed expenses. Make a list of all your bills and payments that come out regularly from your account. This will include rent/mortgage payments, loans, utilities, subscriptions, internet, phone, gym memberships, etc. These are payments you don’t have to use any brain power to think about and are the same/similar amount each month.

Step 2: Set up limits for Flex Expenses. These are expenses that require choice and energy. Groceries, shopping, clothes, entertainment, activities, etc. Flex expenses mean they are not automatic payments. Before you set limits in each of your categories, review the last 3-6 months of spending to determine what your average spend in each category has been.


Warning: Don’t set a spending number for half of what your average spending has been in the past without a clear and concise plan. For example, if your average dining out spend is $600 a month, but you want to reduce this to $300, you need to determine how you are going to decrease this. Does this mean saying no to some friends’ outings? Buying more groceries, getting a Costco membership, or creating easy meals to reduce DoorDash? A spending plan isn’t just numbers on a sheet, it’s going to impact your life and you want to set yourself up for success. Also, think about what brings you the most joy when you spend your dollars. If DoorDash brings you immense joy, can you reduce an area of spending that does not?


Step 3: Review annual expenses. All expenses that don’t happen monthly need to be accounted for. This is arguably the most important part of setting yourself up for success because without thinking about your annual expenses, your monthly spending plan will almost always fail. Write down all non-monthly expenses that happen throughout the year. It helps to look at a calendar or you can use this spreadsheet to help you out. When you add up a year’s worth of expenses and divide it by 12 months, you will get a monthly savings goal to meet all your yearly obligations and spending goals. When you have that list, you will have a plan for what is called a Sinking Fund. 


Step 4: Don’t forget about your goals. You also need to set aside funds for both long and short-term goals like retirement savings, buying a home, travel funds, emergency funds, big purchases, etc. Ideally, these savings are going into their accounts to either be invested or earn some interest. 


Each one of those 4 steps should get you a monthly number to start your spending plan. You should know your monthly fixed expenses, monthly variable/flex expenses, monthly savings for annual expenses, and monthly savings for your goals. 


Here is an example:


Example Of A Flow-Based Spending Plan
1. Fixed Expenses: Rent, utilities, insurance, bills, subscriptions, Monthly Dues, etc.


2. Flex Spending: Groceries, dining out, shopping, clothes, personal care, etc.


3. Non-Monthly: Annual subscriptions, yearly bills, taxes, seasonal passes/tickets, school expenses, holidays, birthday gifts, clubs and classes, etc.


4. Goals: Post-tax retirement savings, vacations, big purchases, etc


Income Needs To Meet This Plan Would Be



If those four steps add up to be higher than your monthly income, then you need to consider either reducing expenses or increasing your income to make your spending plan work. 


Now that you have the strategy, you can implement your spending plan in an app or tool that fits your needs. Here are some options to help you get started:


  1. Use a spreadsheet to start and get organized. You can use this link here to copy a Google sheet that will walk you through setting up a budget using the Flow-Based Budgeting technique explained above. This will take more time and be less proactive than the apps below.
  2. Use Monarch Money. It’s our favorite app to track cash flow and your net worth and to monitor trends in spending over time. You can check whenever you like (daily/weekly) to see if you are staying within your spending plan. Our clients have the most success with this app.
  3. YNAB (You Need A Budget) is a cult favorite. That means you’ll either LOVE it or hate it. This app does have a bit of a learning curve and is very hands-on but the system that YNAB uses does help you stay accountable and keep you from overspending. 


It’s important to approach spending with no judgment, shame, or guilt on yourself (or your partner if you have one). Everyone’s needs and priorities are different and unique and there is no right or wrong when it comes to how you spend your money. As long as you are satisfied with the progress you are making toward your goals and staying out of consumer debt, then you are doing well financially. 


When you aren’t satisfied with your progress, you may set some goals for shifting behavior and spending. This isn’t an easy thing to do alone and sometimes you may need professional assistance in the form of a financial coach (message us and we can send you a list of kickass financial coaches). Just like when you set goals for your physical health, improving your financial health will take discipline, stress management, mental self-care, and accountability. Also, if you are in a partnership, we recommend setting at least a monthly finance date to review your spending plan together (set it for the same day a month and add something fun before or after it). It’s important to be on the same page with your partner when implementing changes to the budget so that responsibility is not all on one person’s shoulders. 


Setting a spending plan doesn’t have to suck. It can help you facilitate the best use of your energy and help you show up as your most authentic self when done correctly. Aligning your dollars with what brings you joy should be fun and encouraging. Let us know if you implement a spending plan with this method and how it goes for you!


*The flow-based spending plan was introduced to us by Natalie Taylor with The Goodland Group who successfully uses it with her clients 😊.