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.

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

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


•Sources of Help


Strong Financial GoalsStrong Financial Goals

•Are SMART

–Specific

–Measurable

–Action-oriented

–Realistic

–Timely

•Are SMART

–Specific

–Measurable

–Action-oriented

–Realistic

–Timely


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


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.

User

deleted previous slide 5.


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


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!


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


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


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


Develop a Personal Financial Plan

Develop a Personal Financial Plan

Financial Planning Worksheet

Financial Planning Worksheet


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


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


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



Savings (Page Three)Savings (Page Three)

•Monthly Contributions to– Reserve Fund

– Emergency Fund

– Goal-Getter Fund

– Investments/IRAs, etc.

– TSP


•Monthly Contributions to– Reserve Fund

– Emergency Fund

– Goal-Getter Fund

– Investments/IRAs, etc.

– TSP


User

added info to reserve and emergency funds


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

User

Replace picture with Average Americans, not Doctors and scientists.


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

User

Changed Identify expenditure purpose to Identify expense category


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


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


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


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%


Where

should this go?

How can we

fix this?

SurplusSurplus

DeficitDeficit

Whereshould

thisgo?

Howcan we

fix this?


The Action Plan (Page Five)The Action Plan (Page Five)


– Decrease living expenses

– Increase income

– Decrease indebtedness

•Referrals and Recommended Training

•Goals Section


– Decrease living expenses

– Increase income

– Decrease indebtedness

•Referrals and Recommended Training

•Goals Section


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.


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


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


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


Print your CertificatePrint your Certificate

Click on the following link to add your name to the certificate and print it:

Developing your Spending Plan

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.

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