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					                                                         ‹#›
              Module 1.1 Developing Your Spending Plan




                Module 1.1




Core PFRP for Transition
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                                                Module 1.1 Developing Your Spending Plan



                                   Disclaimer:
 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.
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                                              Module 1.1 Developing Your Spending Plan


              Learning Objectives
•   Define long-term/short term 
    transition goals                          – Income Statement
•   Determine cost of each goal               – Savings & Expenses
•   Determine current financial situation     – Indebtedness Summary
    using the Financial Planning              – Action plan / Goals
    Worksheet for Transition
                                              – Daily Expense / Spend Plan
•   Compare current financial spending 
    plan to goals                        •   Develop a post-service, 12-month 
                                             transition spending plan
•   Analyze current/desired financial 
    state 
•   Anticipate future requirements        
•   Complete the following sections in 
    their financial spending plan
     – Net Worth Statement
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                                            Module 1.1 Developing Your Spending Plan




                                Why?
A spending plan is a tool that helps you build the financial part of your
                  plan to meet your transitional goals .
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                                    Module 1.1 Developing Your Spending Plan


           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
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                  Module 1.1 Developing Your Spending Plan


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
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                    Module 1.1 Developing Your Spending Plan


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
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                                 Module 1.1 Developing Your Spending Plan


Elements of a Budget

 Inco
  me                                    Savings
                   Budget
                  Elements



                                           Debt
Expenses

                                            s
  To calculate net worth, subtract balance from value
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Module 1.1 Developing Your Spending Plan




                                           4.12
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             Module 1.1 Developing Your Spending Plan


Estimating Net Worth


          www.savingsbond.gov
          www.homegain.com
            www.nada.com
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                               Module 1.1 Developing Your Spending Plan


         Income to Savings

               Total pay + allowances =
                   Gross Income
           Gross income – tax deductions =
                    Net Income
Net income – additional deductions such as allotments =
                  Take-Home Pay

                                                                          4.13
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                  Module 1.1 Developing Your Spending Plan




Complete the Income and Savings
   portion of the worksheet




                                                             4.13
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                                        Module 1.1 Developing Your Spending Plan


                    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 deductions
SGLI (self/family/spouse), TSGLI, AFRH, federal taxes,     (B)         $351.29
                      FICA (social security/medicare)

                              NET INCOME (A – B)           (C)       $4,423.35

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

                  TOTAL TAKE HOME PAY (C - D)                       $4,159.52
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                                           Module 1.1 Developing Your Spending Plan


                       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 deductions
SGLI (self/family/spouse), TSGLI, AFRH, federal taxes, FICA    (B)        $926.28
                                 (social security/medicare)

                                   NET INCOME (A – B) (C)             $5,679.26
                             Total additional deductions
           Monthly savings $200, Monthly investing $200 (D)                  $425

                       TOTAL TAKE HOME PAY (C - D)                    $5,254.26
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          Module 1.1 Developing Your Spending Plan


Living Expenses
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                      Module 1.1 Developing Your Spending Plan


     Tracking Expenses

• Track spending for 2-4 weeks
• Record all expenses daily
• Group expenditures by category
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                     Module 1.1 Developing Your Spending Plan




Calculate the living expenses on the
  Financial Planning Worksheet




                                                                4.13
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                                            Module 1.1 Developing Your Spending Plan

             Expenses
           E5 over 8 years                      E8 over 20 years
Rent                          $1,600 Rent                                   $2001
Electric                        $49 Insurance                                 $190
Insurance                      $190 Cable/Internet                            $175
Cable/Internet               $124.50 Cell Phone                               $250
Cell Phone                     $200 Food                                      $900
Clothing                      $43.50 Transportation                           $250
Food                           $550 Child Support                             $500
Transportation               $275.50 Charity                                  $200
                                     Personal                                 $100
                                     Other                                 $23.93
TOTAL EXPENSES         $3,032.50 TOTAL EXPENSES                      $4,589.93
            73% OF INCOME                         87% OF INCOME
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           Module 1.1 Developing Your Spending Plan


Debt Management
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                               Module 1.1 Developing Your Spending Plan


        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
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                                                  Module 1.1 Developing Your Spending Plan


            70-20-10 Ratio
                             Savings
                              10%
              Debt20
                %

                                              Expens
                                                es
                                               70%



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.
                                                                                                  4.18
                                                                                             21
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                         Module 1.1 Developing Your Spending Plan




Calculate the indebtedness & summary section
    of the Financial Planning Worksheet




                                                                    4.13
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                          Module 1.1 Developing Your Spending Plan




        Debt-to-Income Ratio
Total Monthly Debt Payments / Net Income x 100
                                                                     23
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                              Module 1.1 Developing Your Spending Plan


          70-20-10 Ratio
                           Savings
                            10%
                  Debt20
                    %

                                          Expens
                                            es
                                           70%

Use caution        <15%
Fully extended    15-20%
Overextended      21-30%
Seek assistance   >30%

                                                                              4.18
                                                                         24
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             Module 1.1 Developing Your Spending Plan


The Action Plan
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                   Module 1.1 Developing Your Spending Plan


     Improving a Spending Plan

Increase    Decrease                Decrease
 Income      Living
            Expenses              Indebtedness




                                                              26
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             Module 1.1 Developing Your Spending Plan

Sources of Help
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                                                                                                                                                      Module 1.1 Developing Your Spending Plan


                                                                                   Spending Plan
                                                                                                MONTHLY EXPENSES
MEMBER AND SPOUSE'S NAME                                                                                                                       
TAKE HOME PAY                                                                       0                   0                                                               
SAVINGS                                                                          ACTUAL             PROJECTED                                                     REMARKS
GOAL: 10% OF NET INCOME                                                                                                                                   For comparison purposes only
EMERGENCY 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                                                       REMARKS
HOUSING                                                                                                                  
                                                            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                                                      REMARKS
CLOTHING                                                                                                                 
                                                        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 TWICE
                                                                     RELIGIOUS                                           
GIFTS                                                                                                                    
                                            HOLIDAYS/BIRTHDAYS/ANNIVERSARIES                                             
MISCELLANEOUS                                                                                                            


                                                                                                                                                                                                 4.17
                                      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 

				
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