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Ask Dave

The Prioritized Spending Plan

With a startup business, irregular income and a baby on the way, TJ needs to hear about the prioritized spending plan.

QUESTION: TJ’s wife is a nurse and he’s a chiropractor who is just starting a practice. Her income is steady, but he has an irregular income. They are also expecting a baby soon. Given that, how can they set up a monthly budget that would be effective?

ANSWER: I’d use the budget guideline, but a low end of that. Then when you have extra money come in, you’ve got to have a plan for the extra money above the low average. What you would use there is called the prioritized spending plan. That simply means make a list of everything you want to do that didn’t make the cut in the low average.

When you look at that list with your spouse, you get your basics covered with the low average. If you have enough money left over from that to do one more thing, then see what the next most important thing is that didn’t make the cut. Put a 1 beside that. If you can do one more thing, put a 2 beside that. If you can do another, put a 3 beside that. Then rewrite the list in that order, and then you have your priorities. The first thing you do is make your low average budget, then any money that comes in, you go right down that list in order. You don’t do anything with the money that’s not on that list that you and your wife have agreed on.

For the baby, I’d build up some savings now. After the baby is born and everyone is all right and you get stabilized, then you can use that savings to get out of debt.

Thank you! Your guide is on its way! 

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Learn to Budget Like a Pro

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