man with money in his wallet

When you hear the word “budget,” what do you think of? To most of us, the world budget can be a word with negative connotations, that limits what we can spend our hard-earned money on. So, instead of a Budget Plan, let’s call it a Spending Plan. Think of it as a roadmap that unites your spending and saving to help you meet your overall financial goals, while still being able to buy the items you want. A spending plan is a way to make your spending purposeful and keep your financial goals as your top priority.

Pieces of the Plan

Before you start creating a spending plan, you need to understand the four important building blocks of your spending plan.

  1. Necessary expenses: these are the bills and payments you must make to survive. Necessary expenses fall into three categories:
  • Fixed expenses: Bills that are the same each month. These can be your mortgage or rent payments, the minimum payments on your credit cards or loans, or your phone bill.
  • Irregular expenses: Bills that don’t recur monthly, such as your car insurance, medical expenses, or certain subscriptions.
  • Variable expenses: Bills that fluctuate from month to month, like your energy bill, groceries, or gas. 
  1. Discretionary spending: These are the purchases and spending that are not necessary for survival, such as clothing, take out from your favorite local restaurant or entertainment expenses.
  2. Savings: This is money you set aside to reach a long-term financial goal, such as buying a house, paying for college, or taking a vacation.
  3. Income: This is the money you earn each month, which can come from your paycheck, your partner’s paycheck, investment interest, side jobs, etc.

Creating your Spending Plan

Now that you know what the four important building blocks are that you will need to consider when developing your spending plan, it’s time to start putting your plan together. Below are some easy steps to help you set up your spending plan:

  1. Layout and list your bills: Make a list of all of your necessary expenses—fixed, irregular, and variable.
  2. Track your spending: Keep track of how much you spend on each bill in each of the three categories for a couple of months. An easier way to do this is to log into your Monona Bank Online account, or your True Mobile Banking App, to analyze past transactions to get an idea of how much you spend monthly.
  3. Budget for necessary expenses: Adding your list of necessary expenses to how much you appear to be spending each month will give you the amount of money you should plan to spend on necessities each month. You may have to take an average of your irregular and variable expenses, which is why it’s good to track several months of expenses before creating an effective spending plan.
  4. Calculate your income: Add up all applicable income sources and amounts so you know how much money you have coming in each month.
  5. Delegate to savings: Once your necessary expenses and income are listed, subtract your necessary expenses from your income. The number you get from that calculation will become your initial discretionary income. Your next step is to subtract the amount of money you would like to set aside each month for savings.
    • Pro Tip: Speak with your Banking Advisor or Human Resource Department to set up an automatic transfer out of each paycheck into your savings. That way it is one less thing to think about each month and you will not even miss it.
  6. Plan for discretionary spending: Whatever is left after taking out your necessary expenses plus the amount you want to save each month is what you can use for discretionary spending.

The main purpose of a spending plan is to put you in control of your finances. You may not want to examine how you’ve been spending money, but once you create a spending plan, you’ll realize that it really is about purposeful spending, not deprivation. You can choose to spend your money on anything you’d like, but you can’t spend it on everything you’d like, and a proper spending plan will help you do just that.

Our dedicated team of experienced Banking Advisers are here to help you create your spending plan. To set up an appointment, give us a call at (608) 223-3000 or email us at We’re here to help you reach your financial goals.