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Money Basics

Image representing the 'Money Basics' one pagerGood money control is a matter of cultivating certain money control habits.1 Having good management tools and strategies will help you achieve your financial goals.


Tools and Habits for Achieving Your Goals

Your money behavior and management practices have a big impact on your sense of financial control. Without financial control, you are unlikely to reach your financial goals.

How to Prepare a Realistic Budget

A budget is a self-made tool for directing and controlling your money. Good budgeting helps you to meet important goals, cover all expenses, live within your means, and experience the satisfaction that comes from having finances under control. A budget is a plan for how you will use your money.

Steps to Wi$ing Up - Step 3.1. Building a Realistic Budget

Step 1. Estimate your income. In figuring income from your earnings, include only your take-home pay or net income. Your net income is what you have left after income taxes, Social Security, Medicare, insurance (health, life, disability, etc.), flexible spending plan contributions, retirement savings, and other items have been deducted.

Step 2. Estimate your expenses. Expenses may be classified as either fixed expenses or flexible expenses. Fixed expenses, like rent or mortgage payments and loan repayments, are the same each month, while flexible expenses differ each month. You should consider your special financial goals to be fixed expenses. When you do this, you are more likely to fund your future financial goals. This is the idea behind the conceptpay yourself first.

Step 3. Make adjustments to balance your budget. Is it realistic for you to increase your income? How? Get another job? Get a raise? Hold a garage sale? If you cannot increase your income, your other choice is to reduce your expenses to bring your budget into balance. Sharpening your consumer skills will make you a better shopper and will save money in the long run.

Step 4. Try living within your budget. It is important to track your spending so that you can compare it to what you had budgeted. Getting control of money through effective budgeting is a critically important step in overall financial planning. Live within your budget for a month or two to see if it works.

Step 5. Develop and use a financial record-keeping system that works for you. Another critical tool in the budgeting process is record keeping. There are many ways to keep financial records: by the receipt method, the checkbook method, the recordbook methods, and the computerized financial record-keeping systems. They all require you to summarize your monthly expenses so you can draw conclusions from the experience and know whether your budget really works.

Step 6. Adjust your budget to reflect your real life experience with it. After following your budget for a couple of months, you should be in a position to know if it “works” for you. Fine-tune your budget categories, and reallocate your income to meet your needs. A budget is a very flexible tool if you will make the necessary adjustments.

Steps to Wi$ing Up - Step 3.2. How Do You Communicate?

Good communication can lead to success through a process for determining goals; developing a shared vision; and reaching agreement in how to spend, save, invest, or give away money.

Steps to Wi$ing Up - Step 3.3. So Where’s the Money?

List five ways you could reduce your spending to enhance your budget.

The Action Plan is a critical exercise that will help you turn the lessons learned into action steps :

My action plan for Money Basics is improving my financial record keeping.

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1Source: Chatzsky, Jean. You Don’t Have to Be Rich. New York: Portfolio,
The Penguin Group, 2003. See Chapter 10,
“The Ten Commandments of Financial Happiness, “ pp. 232-233.