p e r s o n a l f i n a n c i a l m a n a g e m e n t p r o g r a m developing your spending plan 1
TRANSCRIPT
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P E R S O N A L F I N A N C I A L M A N A G E M E N T P R O G R A M
Developing Your Spending Plan
Developing Your Spending Plan
1
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 2
AgendaAgenda
•Financial Goals
•Components of the Financial Planning Worksheet
•Net Worth and Net Income
•Expenses and Indebtedness
•Ways to Improve Your Plan
•Sources of Help
•Financial Goals
•Components of the Financial Planning Worksheet
•Net Worth and Net Income
•Expenses and Indebtedness
•Ways to Improve Your Plan
•Sources of Help
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 3
Strong Financial GoalsStrong Financial Goals
•Are SMART
–Specific
–Measurable
–Action-oriented
–Realistic
–Timely
•Are SMART
–Specific
–Measurable
–Action-oriented
–Realistic
–Timely
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 4
SMART GOALI will have $1 million inassets by age 65. To
do that I will invest $250per month in mutual
funds with an average annual
earnings of 10%.
SMART GOALI will have $1 million inassets by age 65. To
do that I will invest $250per month in mutual
funds with an average annual
earnings of 10%.
Goal Setting SamplesGoal Setting Samples
WEAK GOALI want to
be rich
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 5
I will buy a house within the next five years.I will buy a house within the next five years.
To achieve this goal I will:
• Get a copy of my credit report within 30 days.
• Pay off my car one year early by making double payments each month.
• Double my current savings to equal $500 per month to be able to have $30,000 for closing costs, down payment and other expenses.
To achieve this goal I will:
• Get a copy of my credit report within 30 days.
• Pay off my car one year early by making double payments each month.
• Double my current savings to equal $500 per month to be able to have $30,000 for closing costs, down payment and other expenses.
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 6
The Financial Planning PyramidThe Financial Planning Pyramid
Options, Commodities,
etc.
Controlled Spending
AdequateIncome
Adequate Insurance
Goal-Getter
EmergencyReserveSAVINGS
LEVEL
MANAGEMENTLEVEL
Stocks Bonds MutualFunds
RealEstate
HardAssets
INVE
STM
ENT
LEVE
LS
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 7
What is a Spending Plan?What is a Spending Plan?
A written method to achieve your financial goals and manage your
money.
A common name for a spending plan is a budget!
A written method to achieve your financial goals and manage your
money.
A common name for a spending plan is a budget!
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 8
A Spending Plan:A Spending Plan:
•Is a guide and servant – not a master
•Doesn’t need to be down to the penny
•Is easy to understand
•Is a reflection of your needs, wants, values and goals
•Is a guide and servant – not a master
•Doesn’t need to be down to the penny
•Is easy to understand
•Is a reflection of your needs, wants, values and goals
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 9
A Spending Plan:A Spending Plan:
•Is based on current income and expenses
•Is practical and realistic
•Is flexible
•Provides for pleasures as well as necessities
•Is based on current income and expenses
•Is practical and realistic
•Is flexible
•Provides for pleasures as well as necessities
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 10
Planning Will Help You:Planning Will Help You:
•Live within your income
•Realize personal goals
•Maintain a good credit history
•Get more for your money
•Reduce financial stress and arguments
•Achieve financial competence and confidence
•Live within your income
•Realize personal goals
•Maintain a good credit history
•Get more for your money
•Reduce financial stress and arguments
•Achieve financial competence and confidence
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 11
Develop a Personal Financial Plan
Develop a Personal Financial Plan
Financial Planning Worksheet
Financial Planning Worksheet
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 12
The Net Worth (Page One)The Net Worth (Page One)
Assets - Liabilities = Net Worth
(What you OWN minus what you OWE)
A measure of your wealth at a certain point in time
Calculate yearly
Assets - Liabilities = Net Worth
(What you OWN minus what you OWE)
A measure of your wealth at a certain point in time
Calculate yearly
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 13
The Cash Flow or Budget (Pages Two through Four)
The Cash Flow or Budget (Pages Two through Four)
•Income
•Savings
•Living Expenses
•Indebtedness
•Income
•Savings
•Living Expenses
•Indebtedness
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 14
Income (Page Two)Income (Page Two)
•Gross Income: total pay, everything you earn
•Net Income: gross pay less taxes
•Take-home pay: net income less any other deductions or automatic allotments
•Copy Total to Summary, Page Four
•Gross Income: total pay, everything you earn
•Net Income: gross pay less taxes
•Take-home pay: net income less any other deductions or automatic allotments
•Copy Total to Summary, Page Four
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 15
Savings (Page Three)Savings (Page Three)
•Monthly Contributions to– Reserve Fund
– Emergency Fund
– Goal-Getter Fund
– Investments/IRAs, etc.
– TSP
•Copy Total to Summary, Page Four
•Monthly Contributions to– Reserve Fund
– Emergency Fund
– Goal-Getter Fund
– Investments/IRAs, etc.
– TSP
•Copy Total to Summary, Page Four
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 16
Living Expenses (Page Three)Living Expenses (Page Three)
• Monthly Amounts
• Typical Expenses
– Housing and Utilities
– Food
– Transportation
– Child Care
– Clothing
– Insurance and Healthcare
– Leisure, etc.
• Copy total to Summary Page Four
• Monthly Amounts
• Typical Expenses
– Housing and Utilities
– Food
– Transportation
– Child Care
– Clothing
– Insurance and Healthcare
– Leisure, etc.
• Copy total to Summary Page Four
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 17
Track ExpensesTrack Expenses
•Track for 30 days
•Record all expenses each day
•Identify expense category
•Total monthly expenses for each category
•Track for 30 days
•Record all expenses each day
•Identify expense category
•Total monthly expenses for each category
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 18
Indebtedness (Page Four)Indebtedness (Page Four)
•List Creditor and Total Balance Due
•List only the Minimum Monthly Payment Amount
•List Interest Rate
•Total at the Bottom
•Copy Total to Summary
•List Creditor and Total Balance Due
•List only the Minimum Monthly Payment Amount
•List Interest Rate
•Total at the Bottom
•Copy Total to Summary
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 19
Summary Block (Page Four)Summary Block (Page Four)
•Guidelines for Total Net Income
– 70% Living expenses
– 20% Indebtedness
– 10% Savings
•Guidelines for Total Net Income
– 70% Living expenses
– 20% Indebtedness
– 10% Savings
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 20
Debt-to-Income RatioDebt-to-Income Ratio
•Total of all monthly debt payments divided by net monthly income (not including mortgage)
<15% OK to add credit 15 - 20% Fully extended21-30% Overextended>30% Seek help immediately
•Total of all monthly debt payments divided by net monthly income (not including mortgage)
<15% OK to add credit 15 - 20% Fully extended21-30% Overextended>30% Seek help immediately
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 21
Debt-to-Income RatioDebt-to-Income Ratio
Example:
Net income= $2980
Total minimum monthly debt payments= $545
545 / 2980 = .1829
.1829 * 100 = 18.29
Debt-to-income ratio = 18.29%
Example:
Net income= $2980
Total minimum monthly debt payments= $545
545 / 2980 = .1829
.1829 * 100 = 18.29
Debt-to-income ratio = 18.29%
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 22
Where
should this go?
How can we
fix this?
SurplusSurplus
DeficitDeficit
Whereshould
thisgo?
Howcan we
fix this?
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 23
The Action Plan (Page Five)The Action Plan (Page Five)
•Ways to Improve Your Plan
– Decrease living expenses
– Increase income
– Decrease indebtedness
•Referrals and Recommended Training
•Goals Section
•Ways to Improve Your Plan
– Decrease living expenses
– Increase income
– Decrease indebtedness
•Referrals and Recommended Training
•Goals Section
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 24
Your Spending Plan (Page Six)Your Spending Plan (Page Six)
•Paycheck-by-paycheck breakdown
•Forces you to make deliberate spending decisions
If you consider buying something not on your plan:– You must make a choice: take on more
debt, spend money allotted to something else, or pass on the expense.
•Paycheck-by-paycheck breakdown
•Forces you to make deliberate spending decisions
If you consider buying something not on your plan:– You must make a choice: take on more
debt, spend money allotted to something else, or pass on the expense.
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 25
The Automated FPWThe Automated FPW
•Excel Version of FPW available
•See Command Financial Specialist or FSSC Financial Educator for assistance
•www.ffsp.navy.mil
•Excel Version of FPW available
•See Command Financial Specialist or FSSC Financial Educator for assistance
•www.ffsp.navy.mil
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 26
Sources of HelpSources of Help
•Your Command Financial Specialist
•Fleet and Family Support Center
•Navy-Marine Corps Relief Society
•Bank or Credit Union Financial Counselors
•Consumer Credit Counseling Services
•Your Command Financial Specialist
•Fleet and Family Support Center
•Navy-Marine Corps Relief Society
•Bank or Credit Union Financial Counselors
•Consumer Credit Counseling Services
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 27
SummarySummary
•Net Worth
•Cash Flow or Budget
•Action Plan
•Spending Plan
•Expense Tracking
•Net Worth
•Cash Flow or Budget
•Action Plan
•Spending Plan
•Expense Tracking
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D E V E L O P I N G Y O U R S P E N D I N G P L A N 28
Print your CertificatePrint your Certificate
Click on the following link to add your name to the certificate and print it:
Developing your Spending Plan