1 Module 1.1 Developing Your Spending Plan Core PFRP for Transition Module 1.1

1Module 1.1 Developing Your Spending Plan

Core PFRP for Transition

Module 1.1


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.


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


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

meet your transitional goals.


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. Monthly Income

3. Monthly Saving/Expenses

4. Indebtedness

5. Action Plan

6. Expense Tracking Form


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


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 – taxes = Net Income

Net income – deductions such as allotments = Take-Home Pay


4.13

Complete the Income and Savings portion of the worksheet


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


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


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


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


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


Debt Management

Creditor Balance Due Minimum Payment

Interest Rate

Total


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


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.


4.13

Calculate the indebtedness & summary section of the Financial

Planning Worksheet


24

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


Income Summary

25

Expenses 70%

Debt20%

Savings10%

4.18

OK to add credit <15%Fully extended 15-20%

Overextended 21-30%Seek assistance >30%


The Action Plan


Improving a Spending Plan

27

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

Documents

1 Module 1.1 Developing Your Spending Plan Core PFRP for Transition Module 1.1