What is Household Discretionary Expense Planning?

What is Household Discretionary Expense Planning?

Have you ever heard of discretionary expense planning? It’s a concept that can help you manage your finances while still enjoying a few non-essential purchases. In this article, we’ll cover the basics and give you a plan that you can put into action right away. Ready to get started? Continue reading for more details.

Reasons you should start discretionary expense planning

Discretionary expenses include dining out, entertainment, hobbies, and other non-essential goods and services. Discretionary expense planning allows you to make “fun” purchases to keep balance with the less fun obligations you may have. It also creates a clear path should you have an unexpected money windfall.

Why is it important to have a plan for your leftover money?

While it’s okay to indulge in a little luxury and extra spending now and then, it’s crucial to do so within the boundaries of your budget. Without proper planning, it’s easy to lose track of what should be your leftover money and what should go towards essential bills.

By understanding and implementing discretionary expense planning, you can avoid unnecessary financial stress and achieve your financial goals.

Tips for effective discretionary expense planning:

1. Set a realistic monthly budget– Make a list of your expenses so you can identify your financial commitments. Then, compare it to your actual banking transactions. Everything you paid that is not on your original list is most likely discretionary.

2. Prioritize your spending- Identify the discretionary expenses that bring you the most fulfillment. Allocate more of your budget towards these priorities while cutting back on the less fulfilling expenses.

3. Plan for special occasions- It’s easy to agree to extra costs when you’re not in your usual routine, so prepare ahead of time when attending events like weddings or family outings. An effortless way to do this is to withdraw a set amount of cash from the ATM before the event. Then, use the money as needed without withdrawing again or using your debit card for further purchases.

4. Have a “next best step” strategy – As mentioned above, when there’s money left over in our account after paying our bills, we need to know our next best step. Should your household use the extra cash to pay down debt, make non-essential purchases, or should it go towards emergency savings? How much do you feel comfortable allocating to each bucket?

These are questions with answers that will be unique to each household. However, once you decide, stick with your plan to avoid using the surplus in a way you did not intend.

Achieva can help you plan

In conclusion, it’s essential to enjoy life’s little luxuries. At the same time, it’s just as equally important to plan and manage your finances wisely.

With the right approach to discretionary expense planning, you can indulge without jeopardizing your financial well-being. If you need help getting started, Achieva has Wealth Advisors who are happy to assist. Services include:

  • Wealth management
  • CD alternatives and investments
  • Retirement and legacy planning
  • Consultations for events like marriage or the loss of a loved one

Make your plan now, so you’ll be ready for financial decisions in the future.

 

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