Build a Spending Plan That Fits Your Real Life

A spending plan shows how you will use the money you expect to get each month. In class you listed your income and your expenses. The hard part comes when your income changes. Tips, gig apps, cash jobs, and seasonal work can make every month different.

The answer is to plan on a baseline month. This is your lowest typical month of income. It is not your best month, and it is not your average. If you plan on your average, some months will not have enough money for your bills. If you plan on your lowest typical month, your bills are covered in most months, and you decide ahead of time what to do with any extra.

1. Find your income for the last 6 to 12 months. Use pay stubs, bank statements, earnings reports from your apps, or a notebook where you write down cash.
2. Count only take-home pay: the money you get after taxes and other deductions.
3. Find your lowest month. That is your baseline. If that month was very unusual (for example, you were sick for three weeks), use your second-lowest month.
4. No records yet? Write down every dollar you get for the next four weeks, including cash. Start with that amount, and update it as you learn more.

Sorting your expenses helps you decide what to protect and what to cut when money is low.

Needs

Things you must have to live and work: housing, utilities, food, a way to get to work, a phone, and basic medicine.

Obligations

Payments you have promised to someone: loan and credit card payments, child support, money you promised your family, and taxes you will owe.

Savings

Money for emergencies, goals, and costs that come once or twice a year, such as renter's insurance or gifts. Put it in the plan like a bill, so it is not left for last.

Wants

Things that make life better but that you can do without for a while: eating out, new clothes, streaming, and trips.

Money for family is an obligation. If your family depends on you each month, plan that money every month, the same as a bill, and include the transfer fee. Then it is never a surprise. To lower the fee, compare services before you send. See the lesson on sending money abroad.

Since January 1, 2026, a 1% federal tax applies when you pay for a money transfer to another country with cash, a money order, or a cashier's check. On $200, that is $2. The tax does not apply when you pay from a bank or credit union account or with a debit card.

Cash work needs a tax line. If your net earnings from working for yourself, including cash work, are $400 or more in a year, you generally owe self-employment tax of 15.3% on most of them, and income tax may apply too. Carlos sets aside 20% of his cash pay, but that is only an example. When you file, free tax help from a VITA site can show you how much you owed, so you can choose a better amount for next year. See the lesson on taxes for gig and cash work.

A bills account is a second account, or an envelope if you use cash, that holds money only for fixed bills. Fixed bills are the same amount every month. When pay comes in at different times and in different amounts, a bills account keeps the bill money safe until the due date.

1. Add up your fixed monthly bills. For Carlos: rent $1,050, electricity and internet $85, phone $45, credit card $50, and money for his mother $210. Total: $1,440.
2. Divide by the number of paychecks you get in most months. Carlos gets two: $1,440 ÷ 2 = $720 from each paycheck.
3. On payday, move that amount to the bills account right away. Many banks and credit unions let you set this up so it happens by itself.
4. Pay bills only from the bills account. Use your other account, plus tips and cash work, for groceries, Metro, and daily spending.
5. Build a starter reserve: try to keep one extra week of bill money in the bills account.

Paid every two weeks? In most years, two months have three paydays. Do not count the third paycheck in your baseline. Use it to build your bills reserve or your emergency fund.

Paid in cash? Deposit it as soon as you can. Money in an insured account is safer than cash at home, and deposits give you a record of your income. Some banks and credit unions open accounts with an ITIN or a passport. See the lesson on opening a bank account, even without a Social Security number.

Metro Lift. If you get SNAP food benefits from DC, Maryland, or Virginia, you can enroll in Metro Lift and pay half price for Metrobus and Metrorail trips. The discount does not apply to passes or to county buses such as TheBus and Ride On. If Carlos got SNAP and all his trips were on Metrobus and Metrorail, his $110 a month could drop to about $55.

Help with your plan. A financial coach can help you build your first plan and keep using it. These local groups can help:

• DC, Maryland, and Virginia: the Latino Economic Development Center (LEDC) offers free one-on-one financial coaching in English and Spanish. Call 202-540-7400.
• DC: the DC government's Office of Financial Empowerment and Education runs financial education programs, including Financially Fit DC.
• Maryland: the CASH Campaign of Maryland connects Maryland residents with free financial coaching.
• Northern Virginia: Britepaths offers free financial coaching. Call 703-704-6101.