Spending plan module 1

1Module 1.1 Developing Your Spending Plan

Core PFRP for Transition

Module 1.1

2Module 1.1 Developing Your Spending PlanDisclaimer:

The information provided herein does not constitute a formal endorsement of any company, its products, or services by the

Department of Defense. Specifically, the appearance of external hyperlinks does not constitute endorsement by the U.S. Department of Defense of the linked web sites, or the

information, products or services contained therein. The U.S. Department of Defense does not exercise any editorial control

over the information you may find at these locations. This information is being provided as informational resource material to assist military personnel and their families and should be used

to assist in identifying or exploring resources and options.

Competencies:Completion of a working/realistic spending plan for transition that will contain current spending, transitional spending, and

future requirements.


Learning Objectives• Define long-term/short term

transition goals• Determine cost of each goal• Determine current financial

situation using the Financial Planning Worksheet for Transition

• Compare current financial spending plan to goals

• Analyze current/desired financial state

• Anticipate future requirements

• Complete the following sections in their financial spending plan– Net Worth Statement

– Income Statement– Savings & Expenses– Indebtedness Summary– Action plan / Goals– Daily Expense / Spend

Plan• Develop a post-service, 12-

month transition spending plan


A spending plan is a tool that helps you build the financial part of your plan to meet your transitional

goals.

Why?


Spending Plan Characteristics

Guide & servant

No need to account for

each penny

Easy to understand

Reflects wants & needs

Based on current

income/expenses

Practical & realistic

Flexible

Provides for necessities

and fun


Why a Spending Plan is Important

• Live within your income

• Realize personal goals

• Maintain good credit history

• Get more for your money

• Reduce financial stress

• Enjoy financial freedom


The Financial Planning Worksheet

Six components of the worksheet

1. Net Worth Statement

2. Income Statements

3. Savings & Expenses

4. Indebtedness Summary

5. Action Plan / Goals

6. Daily Expense / Spending Plan


To calculate net worth, subtract balance from value

Elements of a Budget

Income Savings

Expenses Debts

Budget Eleme

nts


4.12


Estimating Net Worth

www.savingsbond.govwww.homegain.com

www.nada.com

http://www.savingsbond.gov/

http://www.homegain.com/

http://www.nada.com/


Income to Savings

4.13

Total pay + allowances = Gross Income

Gross income – tax deductions = Net Income

Net income – additional deductions such as allotments =

Take-Home Pay


4.13

Complete the Income and Savings portion of the worksheet


Example 1 E-5 over 8 years w/dependents

Total compensation Base Pay $2,845.20, BAS $348.44, BAH $1,581.00 (A) $4,774.64

Total tax deductionsSGLI (self/family/spouse), TSGLI, AFRH, federal taxes,

FICA (social security/medicare)(B) $351.29

NET INCOME (A – B) (C) $4,423.35

Total additional deductionsMonthly savings $200, monthly investing $63.83 (D) $263.83

TOTAL TAKE HOME PAY (C - D) $4,159.52


Example 2

E-7 over 20 years w/dependents

Total compensation Base Pay $4256.10, BAS $348.44, BAH $2001.00 (A) $6,605.54

Total tax deductionsSGLI (self/family/spouse), TSGLI, AFRH, federal taxes, FICA

(social security/medicare)(B) $926.28

NET INCOME (A – B) (C) $5,679.26

Total additional deductionsMonthly savings $200, Monthly investing $200 (D) $425

TOTAL TAKE HOME PAY (C - D) $5,254.26


Living Expenses


Tracking Expenses

• Track spending for 2-4 weeks• Record all expenses daily• Group expenditures by

category


4.13

Calculate the living expenses on the Financial Planning Worksheet


ExpensesE5 over 8 years E8 over 20 years

Rent $1,600 Rent $2001Electric $49 Insurance $190Insurance $190 Cable/Internet $175Cable/Internet $124.50 Cell Phone $250Cell Phone $200 Food $900Clothing $43.50 Transportation $250Food $550 Child Support $500Transportation $275.50 Charity $200

Personal $100Other $23.93

TOTAL EXPENSES $3,032.50 TOTAL EXPENSES $4,589.9373% OF INCOME 87% OF INCOME


Debt Management

Creditor

Balance Due

Minimum

PaymentInterest

Rate Tot

al


Summary

• Total pay equals all compensation

• Total compensation minus all deductions equals take home pay

• Take home pay is what you live on for the month


70-20-10 Ratio

21

Ex-penses 70%

Debt

20%

Savings10%

4.18

Percentages will vary based on lifestyle, but guidelines prove effective in helping to develop a sound financial plan and keeping

debt at a reasonable level.


4.13

Calculate the indebtedness & summary section of the Financial

Planning Worksheet


23

Debt-to-Income RatioTotal Monthly Debt Payments / Net Income x 100


70-20-10 Ratio

244.18

Use caution <15%Fully extended 15-20%

Overextended 21-30% Seek assistance >30%

Ex-penses 70%

Debt

20%

Savings10%


The Action Plan


Improving a Spending Plan

26

Increase Income

Decrease

Indebtedness

Decrease Living

Expenses


Sources of Help


Spending Plan

4.17

MONTHLY EXPENSESMEMBER AND SPOUSE'S NAME TAKE HOME PAY 0 0 SAVINGS ACTUAL PROJECTED REMARKSGOAL: 10% OF NET INCOME For comparison purposes onlyEMERGENCY FUND (1-3 MONTHS) 0 RESERVE FUND "GOAL-GETTER" FUND 0 INVESTMENTS/IRAS/TSP/ETC 0 PAY PERIOD SAVINGS AND INVESTMENTS (10%) 0 0 LIVING EXPENSES ACTUAL PROJECTED REMARKSHOUSING

MORTGAGE/RENT MAINTENANCE/REPAIRS

FURNISHINGS TAXES/FEES

UTILITIES CABLE/SATELLITE TV/INTERNET

CELLULAR/PAGES/PHONE CARDS/TELEPHONE ELECTRICITY

NATURAL GAS/PROPANE WATER/GARBAGE/SEWAGE

OTHER FOOD

DINING OUT GROCERIES

LUNCHES VENDING MACHINES

MEAL DEDUCTIONS TRANSPORTATION

GASOLINE MAINTENANCE/REPAIRS (INCL. SAVINGS FOR FUTURE) OTHER TRANSPORTATION (TAXI/BUS FARE, PARKING)

OTHER (TAXES/REGISTRATION/LICENSING) INSURANCE

AUTOMOBILE HOMEOWNERS/RENTERS

HEALTH/LIFE/LTD/DENTAL WARRANTIES/OTHERS

HEALTHCARE DENTAL

EYE CARE HOSPITAL/PHYSICIAN

PRESCRIPTIONS SUBTOTAL (PAGE 1) OF MONTHLY LIVING EXPENSES 0 0

MONTHLY EXPENSES (PAGE 2)MEMBER AND SPOUSE'S NAME LIVING EXPENSES ACTUAL PROJECTED REMARKSCLOTHING

LAUNDRY/DRY CLEANING PURCHASES ($50 MONTHLY PER PERSON)

CHILD CARE ALLOWANCES

DAYCARE CHILD SUPPORT

DIAPERS/WIPES, ETC PET CARE

FOOD/SUPPLIES VETERINARIAN/SERVICES (BOARDING/GROOMING)

PERSONAL BEAUTY SHOP/NAILS/BARBER SHOP

CIGARETTES/OTHER TOBACCO/LIQUOR/BEER/WINE VENDING MACHINES

HEALTH CLUB/ORGANIZATIONAL DUES PERSONAL SPENDING FUNDS

OTHER (TOILETRIES, SUPPLEMENTS, ETC) EDUCATION

BOOKS & SUPPLIES FEES (OTHER/ROOM & BOARD)

TUITION/MGIB/POST 9/11 LEISURE/HOBBIES

ATHLETIC EVENTS/SPORTING GOODS BOOKS/MAGAZINES

COMPUTER PRODUCTS (SOFTWARE/HARDWARE) DVD/VIDEO GAME RENTALS

DOWNLOAD MOVIES/MUSIC DVDs & CDs

ENTERTAINMENT LESSONS

TOYS & GAMES TRAVEL/LODGING

CONCERTS/CLUBS/THEATER/OTHER CONTRIBUTIONS

CHARITIES (CFC/NMCRS) SOME CHARITABLE CONTRIBUTIONS ARE ALLOTMENTS DON’T COUNT TWICERELIGIOUS

GIFTS HOLIDAYS/BIRTHDAYS/ANNIVERSARIES

MISCELLANEOUS DEPLOYMENT & TEMPORARY DUTY EXPENSES

ATM FEES/STAMPS/ETC OTHER (TOILETRIES, SUPPLEMENTS, ETC)

SUBTOTAL (PAGE 2) OF MONTHLY LIVING EXPENSES 0 0 GRAND TOTAL OF MONTHLY EXPENSES (70%) 0 0

Spending plan module 1

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