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1Module 1.1 Developing Your Spending Plan
Core PFRP for Transition
Module 1.1
2Module 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.
3Module 1.1 Developing Your Spending Plan
Learning Objectives• Define long-term/short term
transition goals• Determine cost of each goal• Determine current financial
situation using Person Financial Spending 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– Living expense statement– Credit obligations– Action planning– Spend plan
• Develop a post-service, 12-month transition spending plan
4Module 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.
5Module 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
6Module 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
7Module 1.1 Developing Your Spending Plan
The Financial Planning Worksheet
Six components of the worksheet
1. Net Worth Statement
2. Monthly Income
3. Monthly Saving/Expenses
4. Indebtedness
5. Action Plan
6. Expense Tracking Form
8Module 1.1 Developing Your Spending Plan
To calculate net worth, subtract balance from value
The Financial Planning Worksheet
Organizing the worksheet• Top half for personal information • Bottom half for net worth • Left for listing the total value of everything you own • Right for listing the total balance due for everything you owe
Income
Savings
Expenses Debts
Budget Elemen
ts
9Module 1.1 Developing Your Spending Plan
4.12
10Module 1.1 Developing Your Spending Plan
Estimating Net Worth
www.savingsbond.govwww.homegain.com
www.nada.com
11Module 1.1 Developing Your Spending Plan
Income to Savings
4.13
Total pay + allowances = Gross Income
Gross income – taxes = Net Income
Net income – deductions such as allotments = Take-Home Pay
12Module 1.1 Developing Your Spending Plan
4.13
Complete the Income and Savings portion of the worksheet
13Module 1.1 Developing Your Spending Plan
Gross Income – Deductions = Net Income
E-5 E-7
Military Compensation (A) 4774.64 6605.54
Deductions (B) 351.29 926.28
Net Income 4423.36 5679.26
14Module 1.1 Developing Your Spending Plan
Example 1
E-5 over 8 years w/dependentsTotal compensation
Base Pay $2,845.20, BAS $384.44, BAH $1,581.00 (A) $4,774.64Total deductions
SGLI (self/family/spouse), AFRH, federal taxes, FICA (social security/medicare) (B) $351.29
NET INCOME (A – B) (C) $4,423.35Total additional deductions
Monthly savings $200, Monthly investing $63.83 (D) $263.83
TOTAL TAKE HOME PAY (C - D) $4,159.52
15Module 1.1 Developing Your Spending Plan
Example 1
E-8 over 20 years w/dependentsTotal compensation
Base Pay $4256.10, BAS $384.44, BAH $2001.00 (A) $6,605.54Total deductions
SGLI (self/family/spouse), AFRH, federal taxes, FICA (social security/medicare) (B) $926.28
NET INCOME (A – B) (C) $5,679.26Total additional deductions
Monthly savings $200, Monthly investing $200 (D) $425
TOTAL TAKE HOME PAY (C - D) $5,254.26
16Module 1.1 Developing Your Spending Plan
Living Expenses
17Module 1.1 Developing Your Spending Plan
Tracking Expenses
• Track spending for 2-4 weeks• Record all expenses daily• Group expenditures by category
18Module 1.1 Developing Your Spending Plan
4.13
Calculate the living expenses on the Financial Planning Worksheet
19Module 1.1 Developing Your Spending Plan
Expenses
E5 over 8 years E8 over 20 yearsRent $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 $4,689.93
71.39% OF INCOME 71% OF INCOME
20Module 1.1 Developing Your Spending Plan
Debt Management
Creditor Balance Due Minimum Payment
Interest Rate
Total
21Module 1.1 Developing Your Spending Plan
Income Summary
• Total pay equals all military compensation
• Total military compensation minus deductions equals take home pay
• Take home pay divided by 2 (i.e. military pay periods) is what you live on for the month
22Module 1.1 Developing Your Spending Plan
Income Summary
22
Ex-pense
s 70%
Debt20%
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.
23Module 1.1 Developing Your Spending Plan
4.13
Calculate the indebtedness & summary section of the Financial
Planning Worksheet
24Module 1.1 Developing Your Spending Plan
24
Debt-to-Income RatioTotal Monthly Debt Payments / Net Income x 100
25Module 1.1 Developing Your Spending Plan
Income Summary
25
Expenses 70%
Debt20%
Savings10%
4.18
OK to add credit <15%Fully extended 15-20%
Overextended 21-30%Seek assistance >30%
26Module 1.1 Developing Your Spending Plan
The Action Plan
27Module 1.1 Developing Your Spending Plan
Improving a Spending Plan
27
Increase Income
Decrease
Indebtedness
Decrease Living
Expenses
28Module 1.1 Developing Your Spending Plan
Sources of Help
29Module 1.1 Developing Your Spending Plan
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
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