I’m excited to share a budgeting technique that’s not only shaped my financial journey but has also significantly impacted those I’ve worked with. This technique is known as the Plan Ahead Budgeting Method and I’d love for you to use it in managing your own finances or with your clients. All I ask is that if you use it, please honor and use the name, Plan Ahead Method, as I feel like it really captures the true nature of proactive financial planning.

The Philosophy Behind the Plan Ahead Method

If you’ve ever heard of Profit First, you know it’s a concept of how to manage your business finances. Profit First is a concept; how you apply Profit First can vary. You can use a spreadsheet, different bank accounts, pen & paper, software, and even the exact percentages you use can vary. But the concept of Profit First is the same which is why we all call it Profit First. (By the way, great book. If you have no idea what I’m talking about right now, highly recommend it.)

The same is true for the Plan Ahead Method of managing your finances. This approach is how I’ve always managed my own money. In college, I have my original spreadsheets – this is really and truly just the way my brain works. It wasn’t until I started helping people with budgeting as a hobby that I realized this was something other people would really love as well.

I still manage my money this way today. I use this method for my business and personal finances, all the coaches on my team use this method, and all of our clients. Now- again, I want to be clear, HOW it’s applied varies- some are extremely detailed, others are a bit more loose.

Here we’re not going to discuss the customization that can be created with this method of managing your money. But if you’re curious, Toolkit 11 has everything you need. It has the various paycheck structures we use and how we set those up, it’s got tech tutorials since we typically organize this method using google sheets, it’s got the various games we play using this method, all sorts of things that would be great for you or your clients.

A Critical View on Traditional Budgeting

Consider this: 80% of people struggle with budgeting, yet a simple search for “budgeting template” yields hundreds of millions of results. And if you click through the first few pages, what comes up is this idea of a monthly budget – you’ve seen it, I’ve seen it, we all know this format right? You list all your income at the top and you list all your expenses and then at the bottom it says “Viola! You have money left!” or “Crud, you’ve got a shortage!” right?

Life Doesn’t Fit into Monthly Increments

The reason it doesn’t work for most people is because most of us do not live our lives in one-month increments. Or in a monthly bubble. What happens in one month impacts the next month and future months. If I overspend in one month, that’s likely to create a pinch in the following month. If I have surplus, it likely carries over to the next month.

A monthly budget is a snapshot if the month goes perfectly, and frankly, I’ve never had a month go perfectly. Instead of trying to create this perfect plan, what if the way we budgeted actually represented life and all its imperfect glory? It also doesn’t represent the timing factor of real life. If I get my first paycheck on the 7th of the month but I have three bills due before that date, a monthly budget says this isn’t a big deal but you and I both know that it is.

I guess my mind has always thought, “If we don’t live our life that way, why are we told to manage our money that way?” The two just do not jive if you ask me.

Introducing the Plan Ahead Method

The Plan Ahead Method takes into account life’s fluctuations as well as the timing of real life. It also helps resolve what I consider to be the biggest issue facing people and money in our world.

For us at Fiscal Fitness, there are 3 main goals a person has when they first come to us:

  1. They want to have more in savings or be saving more
  2. They’re in debt and want help tackling it or getting out of it and
  3. They overspend or want to get a handle on their spending.

It doesn’t matter if your clients have the same goals as ours or if they’re very different. I think these are all symptoms of a bigger problem, which is that people really struggle to SEE their money clearly.

The Plan Ahead Method is all about planning ahead and removing those fluctuations. The gist is this: You can’t control how life happens to you. But you can control how you feel it financially. If you can plan for 75% of what’s coming up, the other 25% is that much easier to handle. You don’t need to be perfect and watch every penny to feel good about your money and your future.

The goal is to remove the fluctuations in our financial lives and we do that by sorting our expenses into 3 categories. And the 3 categories are determined not by the category of the expense (such as housing) but by the timing of how they hit you in real life. We talk with people about why these categories are so stressful and we really describe what they’re experiencing with these expenses, in a real practical sense, and all too often a person says “Oh my gosh Yes! That’s exactly it!”

The Three Expense Categories

Category 1 are your fixed & recurring expenses. These are the bills. These happen every month and usually have a due date attached to them. The amounts are either static or predictable. So here in AZ in the summer, our electric bills go way up b/c our A/C’s don’t stop running. This is the least stressful of the 3 categories. This is also the # most people think of when they say “my expenses are $3,000.” That total is typically whatever their bills are but there are 2 other categories.

Category 2 is your day-to-day spending. These are the expenses that happen every month but they don’t have a due date attached to them. Things like groceries, eating out, getting a coffee on your way to work, cleaning supplies, maybe giving your kids cash for things like going to the movies or something. This tends to be a lot of the debit card transactions for folks and they tend to really nickel-and-dime a person- $55 here, $7 there.

This category is stressful because no one knows what they’re spending oftentimes. At least when it comes to our clients, when they come to us, they don’t know if they’re spending $600 or $1,600 on groceries and eating out. And everyone walks around saying “I need to cut back on my eating out” or “I gotta get my spending under control.”

So let’s break down what I just said. Most people have no idea what they’re spending on this stuff and yet everyone thinks they should cut back on their spending. They don’t actually know! This is a false belief! But that false belief is causing them stress, sometimes unnecessarily.

Category 3 is the most stressful of the 3 categories. We call it the whammies but it’s the intermittent expenses or the things that don’t happen every month but when they happen, they happen big. There’s the obvious ones- car repair or home repair but even fun things like travel, clothing or gifts. I know for me, I don’t spend money on clothes every month. But then every 6 months or once a year or so I might go and feel like I need a bunch of new things and spend a pretty penny. This category causes the biggest rollercoaster ride financially and emotionally for folks.

Practical Application of the Plan Ahead Method

By dividing expenses into these categories, we can plan more effectively. Fixed expenses are mapped out according to due dates and paycheck arrivals. Day-to-day spending is budgeted per paycheck, simplifying money management without micromanaging every dollar. Intermittent expenses are smoothed out through sinking funds, transforming unpredictable expenses into manageable monthly allocations.

And because it’s all formula driven, if a client decides to spend more, they can see not only the immediate impact of that decision on their bank account balance, but what it means for next month, and what it means for their goal.

Once we remove all those fluctuations, we essentially remove the chaos they’re experiencing with money. Clients are able to TRUST what they’re doing with their money and they’re able to SEE it much more clearly. Their belief in what they’re doing and how it impacts their future comes from being able to see it. It changes the emotional and psychological relationship with finances, turning anxiety into confidence.

Mastering the Plan Ahead Method

Once we establish this foundation, we fund goals with what’s left. And once we establish this foundation, we challenge it. Just like a personal trainer.

  • How can they optimize their income?
  • How can they fund their goals even more?
  • How can we continuously uplevel this plan so it’s a perfect match for their life and what’s important to them?

It really has become a very powerful concept and tool in my coaching business. I hope you love this and if you want our tools and our trainings on the Plan Ahead Method go check out Growth Area 11.