The POWER of PAYCHECK PLANNING

www.credit.org

Promoting Financial Literacy

About Springboard

Springboard is a non-profit organization founded in 1974.

We offer personal financial education and assistance with money, credit, and debt management through educational programs and confidential counseling.

About Springboard

Accredited by the Council on Accreditation (COA)

Member of the National Foundation for Credit Counseling (NFCC)

Certified by the Department of Housing and Urban Development (HUD)

Member of the Better Business Bureau (BBB)

Our Services Include

Credit and Debt Counseling Financial Education Programs – Seminars

and Materials Debt Management Plans Homeowner Assistance (Foreclosure

Prevention) First Time Home Buyer Education Seminars Reverse Mortgage Counseling Pre-Bankruptcy Budget and Credit

Counseling Pre-Discharge Financial Management

Instructional Course

Introduction

Surveys show that only 12% of high school seniors learn about money management in school.

Historically, it has been up to parents to teach their children the skills needed.

Most of us learn these lessons the hard way after we’ve moved out on our own and made some mistakes.

First Steps

Stop incurring new debt Live on a cash basis Get a handle on your situation Relax

What is a Budget?

A budget (spending plan) is a plan to figure out where your money goes before you get it.

Where to Begin When Creating a Budget:

How much do you earn?

How much do you spend?

Track Your Spending!

Track ALL spending for at least 90 days

Write down even the smallest expenditure

Transfer expenses to the monthly tracking sheet to summarize and view by category

Use the forms provided in this book or

Carry a small notebook Keep your receipts in a

separate envelope for each day

Use software like Microsoft® Money or Quicken® (chances are you already own one of these applications if you own a personal computer)

Daily Tracking Sheets

Housing Food Insurance Medical Auto Child Support Taxes Personal Savings

Tracking Sheet for Monthly Expenses

Creating Your Budget

Three things you need to know: IncomeExpensesGoals

Job Spouse’s job Part time job Rentals Commission/bonuses Child support/alimony Investments

Track All Your Sources of Income

Categorizing Your Expenses

The two most important categories of expenses are needs and wants.

Necessary expenses are your needs. Discretionary expenses are your

wants. The rule to bear in mind is this: Anything that

is necessary for you to earn a living is a need.

Necessary Expenses

Housing (include utilities, taxes, insurance)

Food Insurance (medical/dental/life) Medical Transportation (include car insurance) Child care Taxes Savings

Discretionary Expenses

Personal care, clothing, jewelry Entertainment (include cable TV!) Miscellaneous

Pet care Gifts Cell phone Cigarettes/Alcohol Charitable giving Internet access

Periodic Expenses

Insurance premiums Taxes DMV registration Gift giving

Debt Payments

Credit Card Payments Personal Loans Student Loans Any Other Debt Payments

Debt Repayment

After you divide your necessary from your discretionary expenses, you aren’t done categorizing your spending.

This usually takes the form of credit card bills, though auto loan repayments and personal loans would also count.

Take each debt and figure out a monthly payment amount that will allow you to pay off your debts as quickly as possible.

Debt Repayment

For your auto loans, this is your established car payment.

For your credit cards, don’t just send the minimum monthly payment; if you do, you’ll be paying toward that debt for the next 30 years. For example, say you owe $6000 on a credit card.

Over four years, or 48 months, you’d pay $125 per month to wipe out the debt. If that amount is too large for your budget, you can adjust the payoff term to something longer, like 5 years. (Then you’d only have to pay $100 per month.)

Whatever you do, though, don’t stretch out the payoff term so much that you’re just making minimum payments.

Setting Goals

A short–term goal should be accomplished within one year.

A mid-range goal takes between 2 and 5 years to accomplish.

Long-term goals take over 5 years to achieve.

Goal Strategies

Competition Cooperation Attempts Don’t be too

Flexible

Adding It All Up

Now it’s time to put everything together and see whether your budget will work.

Remember, your short, mid and long term goals should be included with your expenses on your budget.

Total Necessary Expenses

+ Total Discretionary Expenses + Total Debt Payments = Total Monthly Expenses

Now Let’s See if Your Budget Balances

Total Monthly Net Income

- Total Monthly Expenses

= Surplus (+) or Deficit (-)

If Your Expenses Exceed Your Income Work to find solutions Credit counseling can help if you have high debt

payments that are upsetting your budget. Whatever you do, don’t cut into the 10% - 15% you

should be saving; you need to save up to three – six total month’s of expenses to get through an emergency

Re-evaluate your budget periodically, especially when your income or needs change.

What Your Spending Should Look Like

Housing 35-45% Utilities 8-15% Food 10-20% Transportation 15-25% Medical 8-15% Clothing 3-5% Personal & Misc. 5-10% Savings 5-10% Monthly Installments 10-20%

Now that you’re more familiar with your income, expenses, and goals, it’s time to propose a monthly budget.

Monthly Budget

Balancing that Budget

Continue to track spending for another 30-60 days to plug budget “leaks”.

Wants vs. Needs – know the difference! Ask before you buy: “How did I get along

without it?” Plan ahead and curb those impulse buys. Include your family in budget discussions

Budget Busters

Food Dine out too often

Five times more expensive than making it yourself Grocery shopping

Entertainment Impulsive nature of it Movies - #1 entertainment outlet

Retail Shopping Paying too much for things Buying what you don’t need Shopping as a form of entertainment

Increasing Income and Reducing Expenses

Make sure you control your money, not the other way around

Rework your budget as needs, priorities, income, and expenses change

Try some of these tips to reduce expenses for You and Your home Your phone Your transportation When grocery shopping

Shopping with Coupons

Coupons can be a valuable tool to help consumers save money at the grocery store.

But coupon shoppers have to be careful; coupons can be advertising devices designed to get you to purchase high-priced name brand items that are still more expensive than the brands you normally buy.

Where Do You Get Coupons?

Wednesday and Sunday • Sunday paper, except before holidays

Grocery store coupons on flyers, mailer coupons, Coupons enclosed in products. Magazines Boxes You can also find coupons online:

Couponcabin.com Ebates.com Keycode.com Ecoupons.com

Shopping Smarter

Planning ahead can make the difference when retail shopping. Use the calendar

as a rough guide for when to find seasonal sales or discounts

Serious Spending Issues – Compulsive shopping vs. Impulsive shopping

10 signs of Compulsive shopping To relieve anger or depression Spending disrupts normal life Conflict with loved ones Lying to family & friends Feelings of elation Taking cash from others – purchasing on your own

credit card Feels like something forbidden Guilt or shame Purchase never unwrapped or used Purchasing on credit for items wouldn’t spend with cash

Your Credit Report

The FACT Act of 2003 mandated that the three major national credit-reporting bureaus establish a website, a toll-free number and a mail address for consumers to request their credit report for free every year:

*You may also purchase your score at this website for a small fee. www.annualcreditreport.com 877-322-8228

Getting Your Report

If you’ve been denied credit because of what your credit report says, you are also entitled to a free copy of the credit report used in the decision - within 60 days of the denial.

Contact the credit bureaus directly Equifax – www.equifax.com Experian – www.experian.com TransUnion – www.transunion.com

Opt Out of Prescreened Offers

If you would like to stop receiving offers of new credit you may Opt Out. www.optoutprescreen.com 1–888-5OPT OUT

Thank You!

Springboard Nonprofit Consumer

Credit Management

www.credit.org

800-947-3752

4351 Latham St. Riverside CA. 92501 www.credit.org