Hitting your future financial goals means setting money aside for them along the way — which means in the long run, you have to spend less money than you earn. Problem is, that’s a whole lot easier said than done. Because, well, life.

A lot of people in the US live paycheck to paycheck, and that’s a very real challenge. Here are some steps you can take to help yourself break out of that cycle. But once your money is a bit more stable, the key to keeping yourself from overspending is all about planning.

Building a spending plan that works for you

At Ellevest, we’re fans of the 50/30/20 rule, which is a high-level, flexible approach to planning out your money. Here’s how it goes, traditionally:

• 50% of your take-home pay goes to needs (bills, groceries, minimum debt payments)

• 30% of your take-home pay goes to fun (eating out, going to the movies, buying stuff you just want)

• 20% of your take-home pay goes to Future You (debt payments above the minimums, saving, and investing)

But those buckets might not work for you yet, especially if you’re just starting out. Maybe right now, 70% of your money is going toward needs, and you can realistically only set aside 5% for Future You. That’s no problem — aim for 70/25/5 and work your way closer over time. The point isn’t what size your buckets are (at least not for now). The point is that you’re paying attention to where your money is going and divvying it up intentionally.

Another way to think about your spending plan is with the one number approach. In that case, the “one number” is essentially your “fun” bucket. You’d add your “needs” bucket to the amount you want to put toward your Future You, then subtract that total from your monthly income. Whatever’s left over is how much you can spend on fun. As long as you aren’t spending more than your number, your plan should be on track.

Once you’ve got your spending plan in place, how do you keep to it?

It depends on whether your job gives you a regular paycheck or your income fluctuates month to month.

Planning tips for people with a consistent income

Save ahead for non-monthly expenses

A monthly spending plan is great for paying bills that come up each month. But what about expenses you pay less often? Things like subscription service renewals (looking at you, Amazon Prime), or annual / semi-annual / quarterly insurance premiums. Less-frequent charges can be pretty disruptive to your plan, but you can prepare for them by saving up ahead of time, a little bit each month.

For example, if your $500 insurance premium will be due in eight months, you’d aim to set aside $500 / 8 = $62.50 each month between now and then. You’ll add this amount to your “needs” bucket each month, and put the money in a separate bank account so you know where it’s going.

Separate “needs” money from “fun” money

Speaking of separate accounts — sometimes the best way to remove the temptation of overspending is to literally remove the money that’s tempting you. That’s why it’s common advice to pay yourself first by moving your “Future You” money into a dedicated bank or investment account right when you get paid so you don’t spend it.

But then you’ve got all the rest of your money, some of which you’ve earmarked for your needs and some that you’ve earmarked for fun. If you find yourself overspending on fun, consider keeping your “fun” money in an entirely different bank account from your “needs” money.

For this approach, you’d need two checking accounts: your main account (the one attached to your debit card) and a new, secondary account (the one where your “needs” money will live).

There are two ways you could go about it. On the one hand, you could set it up so that all your paychecks get deposited into your "needs" account, and then manually transfer the amount you've earmarked for fun into your other account. Or you could reverse it: have your paychecks deposited into that "fun" account and then transfer out what you've earmarked for needs.

You could even set up automatic bill payments to come right out of your needs account so that it’s all on autopilot, out of sight.

(Btw, the reason we recommend using a checking account for your secondary account rather than a savings account is that by law, you’re only allowed to make six withdrawals from a savings account in a given calendar month — which isn’t super convenient if you’re using it to manage your bills.)

Planning tips for people with an inconsistent income

If you’re a freelancer or entrepreneur, if you work on commission, or if you don’t work the same number of hours each week, then your paychecks are probably a lot less predictable — in size and / or in timing. The element of surprise can make it harder to plan out your spending, but it’s definitely doable. Here are two methods you could use.

Give yourself a regular “salary”

The first approach has two parts. First, you’ll need to figure out a target monthly take-home pay to use as the max for your spending plan. Here’s how:

• Figure out how much you typically spend by combing through your debit and / or credit card statements from the past three to six months. Add up all your purchases to see what your monthly average is. (If you had any big purchases that won’t come up again, don’t include those.)

• Make a list of those non-monthly expenses I mentioned above, and divide their total by 12 to see how much they cost you a month, on average.

• Decide on an amount you’d like to set aside for Future You each month, if you can.

Those three numbers together are your target monthly take-home pay. Double check that it’s a realistic number, given how much you’re actually making — multiply it by 12 to see if it lines up with how much you made last year, or how much you expect to make this year. (If it’s not, you’ll have to look for opportunities to trim your spending or boost your income.)

Going forward, if you have a strong month and make more than your target (go you!), try to avoid the temptation to spend it. Instead, set that money aside in a dedicated bank account just for savings — you’ll use it as a buffer if you have a short month in the future.

The goal is to gradually build up a few months’ worth of expenses saved in your buffer account (in addition to any emergency savings you have). Then, if that buffer account keeps getting bigger and bigger and you never need to dip into it, then you can probably give yourself a raise — aka increase the amount of your target take-home pay. (Put it in the Future You bucket!) On the other hand, if you find yourself coming up short each month, look for places to trim.

Base this month’s plan on last month’s income

An alternate approach is to get an entire month ahead — meaning each month, you only spend the money you actually received the month before. And your plan’s spending max for the upcoming month would be based on that amount.

If you want to try this approach, you can work your way up to it gradually — you’d need to spend time cutting back on your expenses in order to get so far ahead. But if it’s feasible for you, it could be worth it — this is probably the safest way to keep yourself from overspending.

Finding a spending plan that fits your real life takes some trial and error. Give some of these techniques a try and see what works for you. If one doesn’t, maybe another one will. Keep trying until you find the sweet spot — Future You will appreciate your hard work.

Disclosures