It’s unavoidable. Food, clothing, rent, utilities — your basic needs are going to force you to give up some of your hard-earned cash, whether you’ve got a lot or a little.
But even if you find yourself scraping along, all it can take to turn things around is a little bit of strategizing. What distinguishes the financially savvy from the financially sloppy is a solid spending plan.

The first step in setting up a spending plan is to list your income streams (the money you’ve got coming in) and fixed expenses (the stuff you know you’re going to have to pay for). This will give you a clearer understanding of your financial situation. Be sure to list all your expenses — the large ones and the small ones — and use familiar categories, such as rent/mortgage, groceries, laundry, utilities, 401(k) contributions and other savings. And don’t forget to include your other expenses, like your outlay for cable/Internet/TV, car payments and insurance, your cell phone, etc.

As you’re doing this, keep in mind what you’re doing it for. A spending plan is not about what you can’t spend money on; it’s a way to keep track of the financial obligations you already have, to list the things you’d like to spend money on, and to help you figure out how to manage your spending to accomplish certain financial goals, like paying down debt or padding your savings account.

Bills are a major consideration, but they’re not as much of a stumbling block as you might think. According to — the Web site of the consumer division of Fair Isaac Corporation, the company that invented the test used to determine your financial credit score — consumers these days generally pay their bills on time, and less than half have ever been reported as 30 or more days late on a payment.

The problem is, while young professionals are paying attention to paying their bills, they usually underestimate the importance of paying themselves.

Treat your savings like another bill: Next time you write a check to one of your creditors, be sure to write a check to yourself. Set up a “due date” for depositing a set amount of money into your savings account, and remember — until you reach your goal, your savings has to have an “in-door only” policy.

That’s just one suggestion to help get you out of the red and into the black. Here are a few more:

Multiple bank accounts are better than one. Deposit your paycheck into more than one account, splitting it up into set percentages or dollar amounts based on your the saving and spending needs you laid out when you drew up your spending plan.

For example, you can set up one checking account specifically for paying off bills and another for “fun money” (spending cash for eating out, going to clubs, etc.), while at the same time maintaining two savings accounts — one a “better safe than sorry” short-term stash to cover unexpected expenses and bail yourself out in case you come up a bit short for bills, and a second “hands off” long-term account where you set aside a percentage of monthly income for major goals like buying your first home.

Be proactive about bill paying. Online bill payment can be a great tool — you enroll through your bank to have standard bills paid automatically on their due date, getting rid of the hassle of making sure you’re mailing payments on time. Most banks offer this service for no additional fee.

Trusting your bank with your cash is one thing — letting creditors have access to your accounts is quite another, and potentially unwise. Remember: This is your money. You worked for it, you earned it. You need to maintain control over it.

If you’re more of a traditional pen-and-paper person and Internet banking isn’t for you, you can stay on the offensive by celebrating a personal monthly holiday that we’ve creatively named “Bill Day.”

“Bill Day” is a predetermined day each month, set depending on your bills’ due dates, when you review your monthly invoices and pay all of your bills by whichever method you prefer. Be sure to copy down important information such as amount paid, date and confirmation number to keep track of your expenditures.

Debt = bad. Heed a very simple rule of thumb: Debt is bad. Get rid of it as quickly as possible.

Paying off your debt in a timely manner is good financial practice. It positively impacts your credit score, which will allow you to obtain credit in the future at much more favorable rates.

It’s best to pay down revolving debt — money owed to a creditor that sets your monthly payments based on your current balance; the most popular and common example is credit card debt — first, because that particular type generally carries high interest rates. Pay more than the minimum and commit to pay a set amount every month until the debt is paid off.

And once you’ve dug yourself out of the credit card hole, it’s critical not to make the same mistakes that got you there in the first place — use credit cards only to make purchases that you can pay off in full when the bill comes due.

Now, this isn’t to say that credit cards are all bad. For some purchases, it is better to use a credit card than a debit card, because it is easier to challenge a faulty purchase made on the former than the latter. Your refusal to pay the credit card transaction will get the vendor’s attention.

Of course, as with every rule, there are exceptions — in this case, educational loans and home mortgages. That said, be careful when entering into a mortgage or buying real estate. It’s always best to have a lawyer review the terms of the deal so that you don’t find yourself in a precarious predicament. And remember: The interest paid on home mortgages can be deducted from your income taxes; the interest paid on your credit cards can not.

Start saving for retirement now. Many employers not only offer 401(k) plans, but may also provide matching contributions. If your employer does not offer a 401(k), or if you wish to supplement your account with additional savings, you may be interested in exploring the benefits of a traditional individual retirement account (IRA), Roth IRA, or Roth 401(k).

Jumpstart your retirement savings as soon as possible by depositing a certain amount from each paycheck into your account of choice. To learn more about the differences and advantages of these accounts, talk to a representative at your local bank or visit the Internal Revenue Service’s Web site at

Seriously consider your past, present and future. Taking a step back to look at the big picture, including long-term goals and where your plans may have fallen short in the past, will give you a much better perspective on your spending and saving habits — and the more information you have, the more prepared you’ll be to improve your future position.

Remember, this set of suggestions is only the tip of the iceberg. You work hard for your money — with a little planning and discipline, your money will return the favor.

Don’t say the B-word
For the uninitiated: Appearances to the contrary, a spending plan is not — we repeat, not — a budget.

“A budget is a detailed itinerary. A spending plan, on the other hand, is just a list of places I’d like to go,” explains J.D. Roth, a self-described “run-of-the-mill middle-aged geek” who blogs at Get Rich Slowly, a site devoted to plain-talk discussion of how to pay off debts, develop investment skills and — perhaps most importantly — practice simplicity and frugality. “It doesn’t have the same sort of rigidity that I associate with a budget. When I create a spending plan, I tally upcoming income and expenses, and then use these numbers as a guideline for determining my financial direction.”

To check out an actual spending plan that J.D. drew up to start paying down his debt, visit blog and in the search box, type in the keywords “budgeting for non-budgeters.”
A snowball’s chance
Looking to dig your way out of revolving debt? Consider debt-snowballing, an increasingly popular method of managing debts. Here’s how it works:
  • First, make a firm commitment not to add to your debt. Seriously. Stop it.

  • Next, make a list of your revolving debts from the highest interest rate to smallest, indicating the minimum monthly payment due for each. Some people prefer to order their list from smallest balance owed to highest, largely because they feel better at seeing the results of paying off the smallest balance first. The financially savvy, however, recognize the benefits of reducing their obligations by first paying off creditors charging the highest interest rates.

  • Third, total up your monthly debt payments — the amount you will commit to pay towards your debt until all of your balances are paid off.

  • Once the first debt on your list is paid in full, increase your payment to the next creditor on the list by the first debt’s amount.

  • Repeat until all debts are paid in full.

After your debts are all paid off, you’ll still have the habit of setting aside a certain amount each month to pay someone. But with no more creditors to pay, what should you do with that cash?

Simple: Deposit this “extra money” into your savings account. Always remember to pay yourself, too.

For more information on debt-snowballing, and a handy calculator to help you figure out how to get your own snowball rolling, check out the What’s the Cost? Web site at

Keep doing your homework
Sure, you might know a little more now than you did when you started reading this article, but for the financially savvy, the education never ends.

Take advantage of the multitude of resources available to learn about budgeting, wealth management, investing and the whole spectrum of financial activity. Some of our favorites include:

“The Color of Money”
Washington Post personal finance columnist Michelle
Singletary’s in-depth, insightful look at the range of financial problems individuals face and how to make the system work in
your favor. The Web site includes an archive of Singletary’s columns, her online Q&A sessions, a weekly e-mail newsletter
and book club listings.

Smart Money Tips
“Dedicated to helping you make smart decisions with your
money,” this site tackles all-too-common issues like how to
be realistic when you budget, staying within your means during
the holidays, and steps to reduce your debts.

Black Enterprise: Personal Finance
This site, sponsored by the venerable “guide to financial empowerment,” offers information on investing, personal
finance, homeownership and the “Black Wealth Initiative,”
kicked off in 2000 to help readers change their attitudes
toward money management.

Young Money
Written primarily by student journalists, since 1999 this
national money, business and lifestyle magazine has aimed
to change “the way young adults earn, manage, invest and
spend money.”

Feed the Pig
Ignore the vaguely ridiculous grown-up-piggy-bank mascot
smiling at you from behind a massive bowtie. Pay attention
to the solid advice on how to make “small savings steps today
to build a solid financial tomorrow.”