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

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 N2 Agenda Financial Goals Components of the Financial Planning Worksheet Net Worth and Net Income Expenses and Indebtedness Ways to Improve Your Plan Sources of Help

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 N3 Strong Financial Goals Are SMART – Specific – Measurable – Action-oriented – Realistic – Timely

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 N4 SMART GOAL I will have $1 million in assets by age 65. To do that I will invest $250 per month in mutual funds with an average annual earnings of 10%. SMART GOAL I will have $1 million in assets by age 65. To do that I will invest $250 per month in mutual funds with an average annual earnings of 10%. Goal Setting Samples WEAK GOAL I want to be rich

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 N5 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.

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 N6 The Financial Planning Pyramid Options, Commodities, etc. Controlled Spending Adequate Income Adequate Insurance Goal- Getter Emergency Reserve SAVINGS LEVEL MANAGEMENT LEVEL Stocks Bonds Mutual Funds Real Estate Hard Assets INVESTMENT LEVELS

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 N7 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!

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 N8 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

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 N9 A Spending Plan: Is based on current income and expenses Is practical and realistic Is flexible Provides for pleasures as well as necessities

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 N10 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

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 N11 Develop a Personal Financial Plan Financial Planning Worksheet

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 N12 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

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 N13 The Cash Flow or Budget (Pages Two through Four) Income Savings Living Expenses Indebtedness

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 N14 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

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 N15 Savings (Page Three) Monthly Contributions to – Reserve Fund – Emergency Fund – Goal-Getter Fund – Investments/IRAs, etc. – TSP Copy Total to Summary, Page Four

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 N16 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

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 N17 Track Expenses Track for 30 days Record all expenses each day Identify expense category Total monthly expenses for each category

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 N18 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

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 N19 Summary Block (Page Four) Guidelines for Total Net Income – 70% Living expenses – 20% Indebtedness – 10% Savings

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 N20 Debt-to-Income Ratio Total of all monthly debt payments divided by net monthly income (not including mortgage) <15% OK to add credit %Fully extended 21-30%Overextended >30%Seek help immediately

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 N21 Debt-to-Income Ratio Example: Net income= $2980 Total minimum monthly debt payments= $ / 2980 = * 100 = Debt-to-income ratio = 18.29%

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 N22 Where should this go? How can we fix this? Surplus Deficit Where should this go? How can we fix this?

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 N23 The Action Plan (Page Five) Ways to Improve Your Plan – Decrease living expenses – Increase income – Decrease indebtedness Referrals and Recommended Training Goals Section

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 N24 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.

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 N25 The Automated FPW Excel Version of FPW available See Command Financial Specialist or FSSC Financial Educator for assistance

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 N26 Sources 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

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 N27 Summary Net Worth Cash Flow or Budget Action Plan Spending Plan Expense Tracking

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 N28 Print your Certificate Click on the following link to add your name to the certificate and print it: Developing your Spending Plan Click on the following link to add your name to the certificate and print it: Developing your Spending Plan