Back to the Frugal Basics: Creating a Plan

by Kelly · 7 comments

in Series


When I first started getting serious about getting a handle on my financial situation, things were a big mess. And chances are that if you have found your way to my blog and are reading this post, you’re not too happy with how things are going in your own financial life.

So here you are, with a nagging sense that things aren’t right. Maybe it’s that feeling in your stomach when you check the mail and see your bank statement waiting to be opened. Or it could be the knowledge that you’ll finish the month with a positive balance if (and only if) the car doesn’t need more gas and the cat doesn’t need to go to the vet. Perhaps it’s just that you don’t know how long your job will last, or when you’ll find a new one.

It isn’t the end. Things do get better. And it starts with a plan.

Having a plan doesn’t mean that you’ll immediately start making progress- in fact it can be even more disheartening when you don’t- but even the little steps you take will bring you one step closer to meeting your goal.

At the beginning of learning about frugality, I only knew that I was sick of feeling all the feelings I described above. I wanted things to be better, and I tried to make them so. I’d throw a lot of money into savings, because I knew I should be saving money, but then I’d need to use it the following month.

What was the problem? I didn’t have a plan. I had no goal to work towards, just an idea of how things should be, and so I kept treading water and going just a bit more under every month.When I created a step by step plan to managing my finances, I was no longer out of control- instead I immediately started to take control.

The first step in making a plan is to have a dream.

So you wanna be more frugal? That’s great… but why? Is it because frugality is the latest buzz word and you don’t want to be the last person to jump on the bandwagon? Or is there another reason? You would like to buy a house, pay off your debts, create an emergency fund or be able to afford to buy groceries every month. Whatever that reason is, that is your dream.

My dream is to be debt free, to have enough money saved that I don’t feel a pit in my stomach when an emergency happens, to have a ‘moving away from France’ fund and a down payment on a house.

The second step in creating a plan is to break it down into goals.

Have I achieved my dream? No, and I’m not even close. It’s a big dream, several big dreams in fact, and that can seem kind of daunting. So I broke down the dream into a more manageable goal.

Why? Because I can only do so much with our limited resources at the moment, and it seems reasonable to me that I not bite off more than I can chew. So my goal, as I elaborated on at the beginning of the year, is to save money towards our emergency and retirement funds and not to take on any new debt.

Creating a plan is about more than breaking down your greater dream into smaller goals. Making a plan is also about how you are going to meet those goals. So when I resolved to save money towards an emergency fund, I came up with an amount that I wanted to save (€1500) and how much I would need to put aside every month to meet that goal (€125).

I have had to empty my emergency fund of the money I’ve put into it so far- we’ve been going through some really hard financial times recently. But boy was I glad that we had the fund to empty, and having to do so hasn’t dissuaded me from continuing to save, not one little bit.

And it is possible to make plans, even when life is full of uncertainty.

Here’s a nice article about how planning (and frugal living) has helped one couple make plans even in a bad economy.

A recent study by the Financial Planning Association and Ameriprise found that people who have a formal plan have more confidence in their ability to reach their financial objectives even in times of uncertainty. In other words, they don’t freak out when their portfolios take a hit and stash their money under the mattress.

We’ll talk next week about building a budget, about finding that extra money when you really feel like you have nothing left at the end of the month. And a few weeks after that, we’ll talk about how to stick to your budget and avoid falling into some deadly, goal busting traps.

But for now, let’s talk about your plans.

What are your dreams? What are your goals to meet in making those dreams a reality? What kind of plan are you making?


1 Miko's Girl March 25, 2009

Nice article. We have friends who used to make an annual plan that included their goals and their budget for the year. This year, I had the same pit in my stomach as you did so I followed my friend’s lead. I looked at our expenses over the past two years to determine trends, made a budget, and identified specific actions we would have to take to reach these goals. We are not perfect at following this plan as it is uncharted water for us – but it’s nice to know we have a plan to bring us back to center.

2 Amanda March 25, 2009

Very good article. I totally agree on breaking down your goals. Working towards one goal at the time will be less likely to cause you to feel overwhelmed and just throw in the towel.

Right now we are working toward paying off our truck. Then we plan to work towards paying off our house. Once we reach those goals, we’ll be completely out of debt. I can’t wait!

Amanda´s last blog post..Provoke Your Kids – To Laughter

3 Kika March 25, 2009

I want my house paid off in the next 7 to 15 years; to save money for a newer vehicle; to take one big trip with all my kids before they leave home or even spend a sabbatical year overseas (debt-free); to help our kids pass through post-secondary studies without debt… mostly to live in a manner that allows our family’s needs to be met without anxiety but also to be a blessing to others.

4 Craig March 25, 2009

Everyone always says creating a plan is the first step in anything. Based off the new I will teach you to be Rich book, he says the same. As long as you begin a plan, you are ahead of most.

5 Amanda March 25, 2009

Great post! Identifying your goals are key. It’s not always a straight line, but every little step helps us reach that goal.

Amanda´s last blog post..Debt

6 Gizimmick March 26, 2009

Great article. The plan should also include a “daily expense log’. This will make the effort of- opening your wallet, pulling out cash, handing it over, putting you wallet away- all the more painful. It must be painful to spend to become ultrafrugal and financially independant.

Gizimmick´s last blog post..I’m not Payn!

7 Kristy @ Master Your March 27, 2009

Love this article Kelly! It'll be in my roundup this week!

Making a plan is so important and it's the one step a lot of people skip. When I first started out on my debt-free journey, I didn't have a plan. I had a vague idea, but nothing written down and concrete. I quickly learned I needed to write it down. The only debt I have now is my car – will be paid off in a few months – and student loans. I'm pretty excited about that because I'm almost completely debt free.

So my plans have shifted since debt isn't so much an issue anymore.

1.) Increase my emergency fund from 6 months to 8 months. I really liked the concept of having enough to cover the unemployment rate when in an economic downturn and it makes sense. So, I'm stocking a little more in there to build that up.

2.) $5k in my travel fund. I was a military brat growing up and moved every 3 months. I loved that. I feel extremely restless being stuck in Texas. I want to be able to travel and have fun, so I've decided the best way to do that is to have a travel fund.

3.) Save for a house. I'm not in any great hurry to do this, so this goal is not one I focus on the most. I do eventually want a house though, so I will be focusing on this goal a bit more this year.

<abbr>Kristy @ Master Your Card´s last blog post..Too Fat To Work? Let the Government Pay Your Way!</abbr>

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