Budget Workbook

• WORKBOOK •
Advice from
Jennifer Openshaw
seen on
Take control today and build a lifetime of financial security. Oprah & CNN
• Create a realistic, personalized budget in 4 easy steps
• Find out where your money is going every month
• Cut 20% from your spending – without sacrifice!
• Free up money to pay off debt and save for retirement
• Get simple tips to save thousands
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The Budget Kit is designed to provide accurate information with regard to the subject
matter covered. It is published with the understanding that the publisher or author is not
rendering legal, accounting, financial or other professional services. If legal advice or other
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The Quick & Easy
Budget Kit Workbook
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Acknowledgements
Thanks to Elaine Floyd for articulating our commitment to unbiased financial

help and bringing her 20 years of writing to this Budget Kit.
Mario Chavez and Bob Benedict, to whom we are grateful for bringing their
amazing technology leadership from Quicken to Family Financial Network
and the CD version of this Kit.
To Tom Houston, whose passion, patience, intelligence, and editorial skills

kept us on time and on track—and made all the difference in bringing real
insights to help real Americans.
To Bob Rowan, Natasha Deganello, and Jackie Cuneo for moving so quickly
to bring these products to life.
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Table of Contents
A Message from Jennifer Openshaw ......................................................................................8
How to Use the Budget Kit....................................................................................................10
Introduction—Why Budget? .................................................................................................. 11
Part 1—What Is Your Net Income and Net Worth? ..............................................13
How much do you really have to spend? .............................................................................. 14

What’s your net income?.......................................................................................................15
What’s your net worth? .........................................................................................................15
Improving net worth by building savings ..............................................................................18
Improving net worth by reducing debt ..................................................................................18
How your net worth will grow ................................................................................................18
Part 2—Estimating Your Spending ...................................................................... 21
Estimating your expenses .....................................................................................................22

Categorizing your expenditures ............................................................................................22
Estimating your expenses worksheet ...................................................................................23
Part 3—Examining Your Actual Spending Patterns ............................................ 25
Examining your actual spending patterns .............................................................................26

Mandatory vs. discretionary..................................................................................................26
Actual expenses worksheets ................................................................................................27
Dealing with unaccounted expenses ....................................................................................34
Comparing your spending to others .....................................................................................36
Part 4—Designing Your New Budget .................................................................. 37
Current spending vs. future goals .........................................................................................38
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What are your financial goals? ..............................................................................................38
Saving for retirement .............................................................................................................39
Saving for other goals ...........................................................................................................43
Setting your goals .................................................................................................................43
Goal worksheet .....................................................................................................................44
Reviewing and revising your goals ........................................................................................45
Creating your new budget .....................................................................................................46
Wants vs. needs ....................................................................................................................46
Reducing spending with money-saving tips .........................................................................47
New planned spending worksheets ......................................................................................48
Summary of Spending Cuts ..................................................................................................62
Allocating your surplus to increase net worth .......................................................................63
Putting the final touches on your final budget ......................................................................66
New budget ...........................................................................................................................67
Comparing your planned spending with others ....................................................................73
Part 5—Keeping Your Budget on Track ............................................................... 75
Monitoring your spending .....................................................................................................77

How to use the Budget Tracker .............................................................................................77
Budget Tracker ......................................................................................................................78
Appendix—Helpful Forms & Worksheets ............................................................. 87
Credit card & other debts ......................................................................................................88

Gift giving ..............................................................................................................................89
Savings & investments ..........................................................................................................90
Charitable giving ...................................................................................................................93
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A Message from Jennifer Openshaw
Seen on Oprah & CNN
For many, the word “budget”

brings to mind a dull life
of scrimping and saving.
But it doesn’t have to be that way
at all. A budget is really a spending
plan that serves as a solid financial
foundation upon which you will be
able to realize your financial dreams.
I understand what many Americans are facing, having grown up in a family
that constantly struggled with its finances. At a very young age, I took a job
as a maid in a motel to make my own money. I then worked several jobs to
put myself through college and put money aside to “reward” myself for reach-
ing my goals. Later, I watched and studied how the wealthy live and build
their wealth. Our goal at Family Financial Network is to help you reach your
own financial goals by using all of the knowledge and tools we’ve accumu-
lated and developed for you.
Today, families and individuals all across America are having to do more with
less financially. Daily money issues leave us stressed, often creeping into our
relationships. We work hard and then wonder what we’ve gotten for all of
that hard work.
Where has our money gone?
The Budget Kit will help you take the most important step to long-term
security—understanding where your money is going. Armed with this infor-
mation, you can begin making necessary and incremental changes in your
spending to start generating more savings.
Using the Budget Kit to develop a realistic budget for your family is simple
and easy. It’s also fun. You will soon begin to make changes in your spending
habits that will yield solid financial results and allow you to save the money
you need not only for retirement, but also for some of life’s extras.
We’ll show you where you can realistically and easily save money. In each
spending category, you’ll find tips on how to save hundreds—even thou-
sands—of dollars that you can put toward savings. Not only will you learn to
save, the Budget Kit will help you learn more about what money really means
to you and the role it plays in your life. With Family Financial Network’s
Budget Kit, you will:
• Find out how much you think you spend and compare it to what you really spend.
• Compare your spending patterns with those of others.
• Learn the difference between what you need and what you want.
• Develop a realistic budget that you and your family can actually follow.
Don’t worry; you won’t have to share these very personal discoveries with
anyone. This process is just for you. With the insight you gain into your
money attitudes and habits, you will quickly achieve even greater mastery
over the role money plays in your life.
Now, let’s get started.
Jennifer Openshaw
CEO, Family Financial Network
How to Use the Budget Kit
Easy 4-Step Process
This Budget Kit Workbook uses a simple 4-step process to guide you quickly and easily in
designing your personalized budget. Here’s a quick summary of the steps you’ll take:
Step 1 Determine where you stand—what your net income and net worth
are and how much money you really have to spend.
Step 2 Quickly estimate what you’re spending and saving.
Step 3 Find out where your money is really going and how much you’re
spending and saving. See how you compare to others.
Step 4 Make reasonable cuts in your spending and create your new budget.
You will probably want to have a simple calculator and pencil handy as you work through
the workbook.
Using the CD &/or Workbook

This workbook can be used independently. It can also be used along with the CD version
of the Budget Kit, which will help you make calculations automatically. The CD will
also enable family members to create a budget under their own username and password.
Remember to register your product at www.familyfn.com (in the Self-help Products area)
to be notified of updates.
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Introduction—Why Budget?
Today, millions of people worry about their financial future. They dream of having a
larger house, sending their kids to college, or having a little extra for themselves. But, more
often, they worry about being able to have a secure financial future. Arguments about
money are common. “Where is our money going every month?” “Why can’t we seem to
get ahead?” “When are our money worries going to end?” These are all common questions
facing Americans.
We all receive some form of income. But is it going where we want? Are we spending
our dollars so that we get what we want out of life—like a good education for our children,
a secure retirement, or a life free of financial stress?
Managing money isn’t easy. But the first step to managing our money—and ultimately
to securing our financial future—is knowing where our hard-earned dollars are going.
The Quick & Easy Budget Kit will help you take that all-important first step. And, once
you know where your money is going, you will be able to make the changes you need to
create and follow a budget that will start building your financial future.
Here’s how budgeting will change your attitude toward money and improve your life:
• Understand where your money is going—Most Americans have no idea where
their money is going. Are they spending too much on dining out when it should
be going toward retirement? Without a budget, how can you expect to have the
things you want in life, like a nice vacation or a secure retirement?
• Spend within your means—The majority of Americans live paycheck to paycheck.
Many Americans consistently spend more than they earn. The result is increasing
debt, which only leads to higher expenses and more financial stress.
• Set spending priorities—As we transition through different stages in life, our
priorities change. Maybe you have a new child who requires current spending on
clothes and diapers, as well as saving for future expenses, such as college. Maybe
you’re heading into retirement and will have to live on a much lower income.
Maybe you have mounting debt that needs to be paid off—before it affects your
credit and you get turned down for a home loan. Proper budgeting will help you
think about what’s really important to you and help you begin to prioritize your
spending.
• Free yourself from stress and worry—Money issues continue to be a major source
of stress. Creating a budget that you can share with your family will help set a clear
course for spending and eliminate disagreements and anxiety over money.
Budgeting is really planning: It’s deciding in advance how you want to spend the money
you take in each month—rather than making spending decisions on the fly. Companies
budget regularly to make sure they spend their money wisely and build financial success.
Our goal is to help you do the same.
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Part 1
What Is Your Net Income
and Net Worth?
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What Is Your Net Income and Net Worth?
In this section you’ll do some basic calculations to determine where you stand financially.
How Much Do You Really Have to Spend?
This may seem like a simple question. Whatever amount of money you have coming in
each month—your income—is what you have available for spending. But the fact is that we
all have to pay taxes and other fees to Uncle Sam and other government organizations. So,
the first step to understanding how much you really have to spend is to determine what
your “net income” is—that is, your income after you have paid all mandatory taxes.
Entering Your Income
Please list your gross annual household income from all sources before taxes.
Income Annual
Salary/Wages $ ____________
Commissions/Bonuses $ ____________
Interest/Dividends $ ____________
Alimony Received $ ____________
Child Support Received $ ____________
Other $ ____________
Total Annual Gross Income (add items above) +$ ____________
Total Monthly Gross Income $ ____________
(divide your Total Annual Gross Income above by 12 )
Subtracting Taxes
To see how much of your family’s income is available for spending, you will need to
subtract taxes, including federal and state income taxes and FICA (Social Security and
Medicare) taxes from your income. To calculate your annual taxes, simply look at your most
recent paycheck stub and find the entries that correspond with the categories listed below.
Then, multiply the figure on your paycheck by 26 if you are paid every two weeks or by 12
if you are paid once a month. For example, if your latest paycheck shows $100 withheld for
FICA/Social Security and you are paid every two weeks, then you should input $2,600
($100 x 26) into the FICA/Social Security Taxes line below. Alternatively, to determine
your annual taxes for these categories, you can look at last year’s W-2 form from your
employer, which reports on all taxes withheld for the entire year. (If you have significant
other income from which taxes are not withheld, such as business or investment income,
you will have to estimate the taxes on this income.) Please list the annual amounts your
family pays toward taxes:
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Taxes Annual
Federal Income Tax $ ____________
State Income Tax $ ____________
FICA/Social Security Taxes* $ ____________
FICA/Medicare $ ____________
Other +$ ____________
Total Taxes $ ____________
*The maximum annual Social Security tax for 2004 is $5,450.
What’s Your Net Income?

Your “net income” is the amount your family has available to spend after taxes have been
subtracted. Figure your family’s net income as follows:
Total Annual Gross Income (from page 14) $ ____________
Minus Total Taxes (from above) -$ ____________
Net Income =$ ____________
Calculate your monthly net income by dividing your annual
net income above by 12 and enter it here:
Monthly Net Income: $ ____________
What’s Your Net Worth?

Your net worth is the value of everything you own—minus all the amounts you owe.
Assets (what I own) - Liabilities (what I owe) = Net Worth (what I’m worth financially)
In a moment, we’ll talk about why budgeting can be so important to building your net
worth. But first, find out what your net worth is by using the worksheet on the follow-
ing page. If you’re married, include the assets and liabilities of both you and your spouse.
Calculate your net worth once a year, preferably at the beginning of each year, to watch
your progress. Be realistic in the value you place on your current assets and refer to your
records to get an accurate picture of your liabilities. For assets, enter the current value. For
liabilities, enter the total amount owed. For example, if you own a home that is currently
worth $300,000, enter that figure in the Asset column. If the home has an outstanding
mortgage of $200,000, enter that figure in the Liability column.
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Assets (what I own)
Cash and Cash Equivalents You Spouse Total
Cash _____________ ____________ ____________
Checking _____________ ____________ ____________
Savings _____________ ____________ ____________
Money market account _____________ ____________ ____________
Cash value of life insurance _____________ ____________ ____________
CDs _____________ ____________ ____________
Other _____________ ____________ ____________
Subtotal _____________ ____________ ____________
Retirement Accounts You Spouse Total

IRA/Roth IRA _____________ ____________ ____________
Pension/Profit-sharing _____________ ____________ ____________
401(k)/403(b)/457 _____________ ____________ ____________
SEP/Keoghs _____________ ____________ ____________
Annuities (surrender value) _____________ ____________ ____________
Subtotal _____________ ____________ ____________
Other Investments You Spouse Total

Stocks _____________ ____________ ____________
Bonds _____________ ____________ ____________
Mutual funds _____________ ____________ ____________
Government securities _____________ ____________ ____________
Land/property _____________ ____________ ____________
Business _____________ ____________ ____________
Receivables _____________ ____________ ____________
Trust _____________ ____________ ____________
Other _____________ ____________ ____________
Subtotal _____________ ____________ ____________
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Property You Spouse Total
Home _____________ ____________ ____________
Second/rental home _____________ ____________ ____________
Car(s) _____________ ____________ ____________
Household items _____________ ____________ ____________
Jewelry _____________ ____________ ____________
Antiques/collectibles _____________ ____________ ____________
Boat/mobile home _____________ ____________ ____________
Other _____________ ____________ ____________
Subtotal _____________ ____________ ____________
TOTAL ASSETS _____________ ____________ ____________
Liabilities (what I owe)

You Spouse Total
Outstanding taxes due _____________ ____________ ____________
College loans _____________ ____________ ____________
Back alimony/child support owed _____________ ____________ ____________
Home mortgage(s) _____________ ____________ ____________
Business loan(s) _____________ ____________ ____________
Car loans _____________ ____________ ____________
Personal loan(s) _____________ ____________ ____________
Home equity loan(s) _____________ ____________ ____________
Credit card debt _____________ ____________ ____________
Other Debt _____________ ____________ ____________
Other Debt _____________ ____________ ____________
TOTAL LIABILITIES _____________ ____________ ____________
Your Current Net Worth

Total Assets $ ____________
Total Liabilities - $ ____________
Net Worth = $ ____________
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Improving Net Worth by Building Savings
One of the best ways to build your wealth is to increase your savings. And, as we’ll
highlight later, certain types of savings accounts will help you build your net worth faster
and more effectively than other types. Helping you to identify and achieve real savings is
one of the key goals of this Budget Kit.
If this Budget Kit helps you spend $100 less every month on incidentals you won’t even
miss, you’ll have $1,200 at the end of the year to spend on something you really want. But
if, instead of spending the $100 each month, you invest it in a mutual fund that returns 6%
compounded annually, at the end of the second year you’ll have just over $2,500 to spend
on clothes, a vacation, furniture, or whatever gives you pleasure. If you keep it up another
three years, you’ll have nearly $7,000, enough for a home theater or three weeks in Tuscany.
Keep investing the $100 each month for 20 years and you’ll have $46,000, a good start on
a retirement nest egg. Now, keep in mind that your contribution to this $46,000 would
be just $24,000—$100 x 12 months x 20 years. The remaining $22,000 is composed of
investment returns, or money you didn’t have to work for. Obviously, the more you save,
the more investment returns you can earn. Increase your savings to $200 per month and
you’ll have over $2,400 in one year, $5,100 in two years, $14,000 in five years, and over
$92,000 in 20 years. Of that $92,000, only $48,000 came from your own contributions;
$44,000 came from investment returns you didn’t have to work for. (Investment returns
may vary.)
Many people think they can’t save. But time and time again, we find that people can—
if they really want to. For example, the $1.50 spent per day on bottled water, if invested
instead, would yield about $45,000 over 30 years assuming 6% interest. The Budget Kit
will help you identify small changes that, if converted into savings over time, can yield real
financial results and significant, positive changes in your net worth.
Improving Net Worth by Reducing Debt
A positive change in net worth can also happen if you cut your spending and use the
extra money to get out of debt. In this case, you are moving from a large negative number
in the net worth equation to a smaller negative number. Why is this a good thing to do?
Because debt costs money. It’s the flip side of the savings dynamic noted above. Instead of
receiving investment earnings that compound and make your savings grow ever larger, you
are being charged interest on your debt, which compounds and cuts into the amount you
have available for everyday spending. If you don’t keep up with the interest payments—that
is, if your monthly interest charges and fees exceed your monthly payments—you’ll go even
deeper into debt and your net worth will continue to decline.
How Your Net Worth Will Grow
The net worth form on page 17 is like the “before” picture in those diet commercials.
You may not like the snapshot now, but having it will make you feel good later on, after
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you’ve followed your budget plan for a while and can see a real difference in your net worth.
You’ll see the lasting result of cutting spending in areas you won’t even miss. As you begin
to live within your means—or below your means—you’ll build more savings or reduce your
debt and generally build a stronger financial foundation. Once you see positive changes in
your net worth, you’ll be convinced that planned spending is so much more effective than
impulsive spending. And you may even find that you’re enjoying life more because you’ll be
spending money on the things you really want, not impulse items that provide little lasting
pleasure.
So, even if you’re afraid to see the result, fill in the net worth form listing all of your
assets and liabilities. If your net worth is negative—that is, you owe more than you own—
don’t feel bad. Millions of Americans have a negative net worth. Instead, congratulate
yourself on buying this Budget Kit and look forward to seeing the difference spending
changes can make in increasing your net worth.
Finally, remember that net worth usually varies with age—younger people are more
likely to have a negative or very low net worth whereas older people, who have had time
to save and invest wisely, are likely to see higher numbers. Also remember that how you
choose to invest your savings can have a great impact on your net worth.
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Part 2
Estimating Your Spending
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Estimating Your Spending
In this section you will estimate your expenses so you can get a rough idea of where your
money has been going.
Estimating Your Expenses
Before you prepare your new budget, or spending plan, it will help to understand how
you think you’ve been spending money in the past. Again, do not be afraid to take a hard
look at previous bad habits. If money has been slipping through your fingers, join the club—
it happens to all of us on occasion. What you really want to identify are regular instances
of overspending that add up over time. The fast-food lunches that are bad for you anyway,
the daily lattes, the high-priced telephone calling plan, the premium cable TV services you
rarely use—these may seem like insignificant amounts when viewed in isolation, but when
added up over a year or two can be surprisingly large amounts. Once you see how much of
your income has been going toward these habitual and unsatisfying purchases, you can take
positive steps to reallocate those funds to your priority areas. Whether you decide to spend
the money on something else or allocate it to savings or debt reduction, you’ll be making
a conscious choice to do something different with your money—something that gives you
more pleasure than in the past.
One of the biggest budgeting mistakes people make is underestimating their expenses.
Thanks to credit cards that allow people to spend money they may not have, most people
actually spend more than they think they do. Then they wonder why they can’t get ahead.
So, the first step is to see how big a gap there is between perception and reality. First, we’ll
ask you to estimate your family’s spending in the various categories. Later, we’ll show you
how to compare your actual spending to your estimates. Get ready to gain some valuable
insights into your spending and saving patterns. These insights will help you and your
family better manage your money in the future.
Categorizing Your Expenditures
Categorizing your expenses is crucial to the budgeting process. You may have made
dozens of transactions this month, ranging from that big check you wrote out for your mort-
gage payment to the $3 birthday card you bought for your aunt yesterday. One effective way
to manage all these transactions is to categorize your expenditures. If you put the mortgage
payment into the “housing” category and the birthday card into the “gifts” category, you
can manage the many transactions you enter into over a month’s time. First, we’ll work with
broad categories such as housing, utilities, food, and so on, so you can see the big picture.
Later, we’ll drill down into subcategories, such as meals out versus groceries for the home, so
you can identify areas of discretionary spending that you might want to change. For example,
fewer meals out might mean you can take music lessons instead—if that’s what you’d like to
do. Soon, you’ll see that budgeting is not a punitive process but a tool to help you and your
family have the things you want.
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Estimating Your Expenses Worksheet
Please make a “ballpark” estimate of your expenses in each of the following categories.
Don’t spend a lot of time on this. Just move quickly and think off the top of your head how
much money you spend each year in these areas.
Annual
Housing $ ____________
Includes: house payment or rent; homeowner’s or renter’s insurance premiums;
property taxes; maintenance, repairs, and improvements; furniture, appliances,
and accessories; cleaning services.
Utilities $ ____________
Includes: electricity; gas; water/sewer; trash pickup; cable; telephone; cell phone;
Internet service.
Transportation $ ____________
Includes: car loan or lease payments; car insurance; gasoline; repairs and
maintenance; parking, tolls, registration, Auto Club; public transportation.
Food $ ____________
Includes: groceries & other household items purchased at the grocery store; meals out.
Clothing/personal care $ ____________

Includes: clothes, shoes; dry cleaning/laundry; haircuts, cosmetics; gym membership,
yoga and other exercise classes.
Entertainment/hobbies/reading/gifts $ ____________
Includes: concerts, theater, other entertainment; music lessons, CDs, books,
other hobbies; Holiday/Christmas, birthday gifts.
Travel $ ____________
Includes: vacations and weekend getaways (airfare, hotel, car rental).
Education/child care $ ____________

Includes: private school or college tuition; allowances for student(s) away from home;
student loan payments; childcare; PTA dues and contributions.
Payments to others $ ____________

Includes: alimony; child support; charitable contributions.
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Estimating Your Expenses Worksheet (continued)
Annual
Health care $ ____________

Includes: health insurance; medical and dental services and supplies; drugs.
Insurance premiums $ ____________

Includes: premiums for insurance other than home, auto, and health listed above,
such as disability, life, and long-term care insurance.
Miscellaneous expenses $ ____________

Includes: any other expenses not listed above.
Credit card and other debt repayments $ ____________

Includes: planned payments to reduce outstanding credit card debt. It does not
include payments for current credit card purchases.
Deposits to savings $ ____________

Includes: deposits being automatically made to retirement or savings plans
(such as 401(k), 403(b), investment accounts, etc.) and your planned/ongoing
deposits to IRAs, SEPs, bank savings accounts, etc.
Estimated Summary
Total Spending: $ ____________
(add all categories above except for Credit card and other
debt repayments and Deposits to savings)
Total Credit Card and Other Debt Repayments (from above): +$ ____________
Total Deposits to Savings (from above): +$ ____________
Grand Total Estimated Spending & Savings: =$ ____________
(spending, debt repayments, savings)
Compare your annual net income from page 15 to the Grand Total above.
Based upon your estimated expenses, are you living within your net income?
Yes _________ No ___________
Now, let’s move on and examine your actual spending.
24
Part 3
Examining Your Actual
Spending Patterns
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Examining Your Actual Spending Patterns
In this section, you will take a hard look at your actual spending patterns.
Now, you’ll be asked to drill down into subcategories of your spending to get a clearer
picture of your actual spending and savings. The ballpark estimates you did previously are
good for quickly seeing the big picture, but if you want to learn how to cut unnecessary
spending so you can allocate those funds to the things you really want, like a comfortable
retirement, you’ll need to be more precise.
It may help to gather your check register or bank statements, credit card statements,
last year’s tax return, and other receipts so you can see exactly where your money has been
going.
In entering your actual expenditures, you will be working on a monthly schedule.
That’s because most bills are paid on a monthly basis. But your spending in many of the
subcategories may not be consistent from month to month. For example, your car insur-
ance payments may be payable every three months or your gym membership dues may be
payable twice a year. In these cases, add up your spending for the year and divide by 12;
enter that figure as a monthly amount. Also, if a spending category does not pertain to you,
simply leave it blank.
Remember, you do not have to fill in all of your actual expenses in one sitting. At any
time, you can stop where you are and return to finish it later.
Mandatory vs. Discretionary
A mistake some people make when examining their actual expenses is to overlook
discretionary expenses such as eating out, entertainment, and impulse purchases at the
mall. These are the dietary equivalent of a handful of peanuts or a couple of cookies eaten
on the run—often they are consumed unconsciously, but the calories do count. One of the
objectives of this Budget Kit is to help you see where all of your money is really going and
to see how these discretionary expenses add up over time.
Now, let’s get started with figuring your actual expenses.
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Actual Expenses Worksheets
Please enter the amounts you typically spend in each subcategory. We suggest using a pencil
so you can make changes easily.
Spending on Housing Monthly Annual

House payment or rent $ ____________ $ ____________
Homeowners or renters insurance premiums $ ____________ $ ____________
Condo or association dues $ ____________ $ ____________
Property taxes $ ____________ $ ____________
Maintenance, repairs, and improvements $ ____________ $ ____________
Furniture, appliances, accessories $ ____________ $ ____________
Cleaning services $ ____________ $ ____________
Other $ ____________ $ ____________
Other $ ____________ $ ____________
Other $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
How much of your income should go to should not exceed $560; if it is $3,000, then
FYI housing? Mortgage companies have $840; and so on. If you have particular-
guidelines for how much your hous- ly strong credit or financial assets, you may
ing costs should be in order to manage be able to exceed these guidelines.
your debt. Generally, housing costs should The Value of Owning a Home About 70% of
not exceed 28% of your gross income. This Americans view buying a home as being a
means that for every $1,000 in gross in- safe and smart investment (Fannie Mae).
come you generate each month, no more
than $280 should go toward your housing
costs (including rent or mortgage, property
taxes and insurance). If your gross month-
ly income is $2,000, your housing costs
27
Spending on Utilities Monthly Annual
Electricity $ ____________ $ ____________
Gas $ ____________ $ ____________
Water/sewer $ ____________ $ ____________
Trash pickup $ ____________ $ ____________
Cable $ ____________ $ ____________
Telephone $ ____________ $ ____________
Cell phone $ ____________ $ ____________
Internet $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Spending on Transportation Monthly Annual
Car loan or lease payment #1 $ ____________ $ ____________
Automobile insurance $ ____________ $ ____________
Car registration $ ____________ $ ____________
Gasoline $ ____________ $ ____________
Repairs and maintenance $ ____________ $ ____________
Parking, tolls, auto club $ ____________ $ ____________
Public transportation $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Average Spending on a Cell Phone Over The Costs of Driving Fast The faster you drive
FYI60% of American adults own a cell the lower your fuel efficiency. In fact each
phone. Just over 40% pay more 5 mph you drive over 60 mph, it costs you
than $600 per year on cellular bills. About the equivalent of an additional 10 cents a
23% pay more than $900 gallon (U.S. Department of Energy’s Envi-
(Scarborough Research). ronmental Protection Agency).
Average Internet and Cable Costs The average Savings of a Fuel Efficient Car The difference
household pays $24.30 per month for Inter- between a car that gets 20 mpg and one
net access and $43.10 for cable TV that gets 30 mpg amounts to approximately
(Scarborough) $1,500 more in gasoline over five years
(Iowa Energy Center).
28
Spending on Food Monthly Annual
Groceries & household items $ ____________ $ ____________
Meals out $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Spending on Clothing and Personal Care Monthly Annual

Clothes, shoes $ ____________ $ ____________
Dry cleaning/laundry $ ____________ $ ____________
Haircuts, cosmetics $ ____________ $ ____________
Gym membership, classes $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Spending on Entertainment, Hobbies and Gifts Monthly Annual

Concerts, theater, other entertainment $ ____________ $ ____________
Music lessons, CDs, books, other hobbies $ ____________ $ ____________
Holidays/Christmas, birthday gifts $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Average Spending on Food The aver- Spending on Having Fun The average house-
FYI age household spends about $5,800 hold spends $2,000 a year on entertain-
per year on food. About $2,200 of ment (BLS).
it goes toward McDonald’s, Starbucks and Impulsive spending Based on a study of peo-
other restaurants (BLS). ple living in Iowa, women were far more
Consumers are Eating Out More The amount likely than men to buy something without
spent on dining out is going up about 4% a needing it (36% vs. 18%), buy something
year (Bureau of Labor Statistics). because it’s on sale (24% vs. 5%), shop im-
Using Coupons Only about 21% of shoppers pulsively (36% to 18%) or shop to celebrate
use coupons to save (31% vs. 19%) (Bankrate.com)
(Food Marketing Institute).
29
Spending on Travel Monthly Annual
Vacations $ ____________ $ ____________
Weekend getaways $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Spending on Education and Child Care Monthly Annual

Private school or college tuition $ ____________ $ ____________
Allowance for student(s) away from home $ ____________ $ ____________
Student loan payments $ ____________ $ ____________
Child care (preschool, babysitter) $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Spending on Vacations Americans Average Credit Card Debt The average house-
FYI spend about $1,600 for the typi- hold credit card debt is $9,000
cal vacation including hotel costs. If (Cardweb.com)
they stay with friends their vacation costs The average credit card debt for a college
go down to $795 (Family Travel Network). student is $1,600 (Cardweb.com).
Average Student Debt The average stu- Costs of Raising a Child Here is what American
dent debt doubled from $9,188 in 1992 to families spend to raise one child to maturity:
$16,928 in 1999 (College Board). (Children’s Defense Fund).
Rising Costs of College The cost of attend- Income Level Spending
ing college rose 40% over the last 10 years under $38,000 $121,000
(College Board). $38,000 to $64,000 $165,000
over $64,000 $240,000
30
Spending on Payments to Others Monthly Annual
Alimony payments $ ____________ $ ____________
Child support payments $ ____________ $ ____________
Charitable contributions $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Spending on Health Care Monthly Annual

Health insurance $ ____________ $ ____________
Medical services and supplies $ ____________ $ ____________
Dental insurance $ ____________ $ ____________
Dental services and supplies $ ____________ $ ____________
Prescriptions $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Children and Single Parents 23 million Spending on Health Care Consumers spend
FYI children live with only one divorced over $200 billion on health care costs not
parent (Census). covered by insurance
The Average Custody Award The average (National Health Expenditure Survey).
award for child custody is about $4,200 a Average Out-of-Pocket Health Costs The average
year (US Census). annual out-of-pocket health care costs for
a typical insured employee with family cov-
erage rose from $1,890 in 2000 to $2,790 in
2001 (Kaiser Family Foundation).
31
Spending on Insurance Premiums Monthly Annual
Life $ ____________ $ ____________
Disability $ ____________ $ ____________
Long-term care $ ____________ $ ____________
Other $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Miscellaneous Spending Monthly Annual

Write down any miscellaneous expenses that do not fall into the categories above.
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Chances of Becoming Disabled If you Insuring your wedding Strange as it sounds,

FYI are between 25 and 55, you are you can insure your wedding with “event
more than twice as likely to become insurance.” It covers most major expens-
disabled than you are to die (Insurance In- es, such as the wedding dress, the costs of
formation Institute). A 20-year-old has a flowers and the reception deposit if adverse
33% chance of becoming disabled before weather or some calamity cancels your
reaching the age of 65 (Social Security Ad- wedding. No, it does not cover “cold feet”
ministration). Yet many more people carry on the part of the groom!
life insurance than disability insurance.
32
Credit Card and Other Debt Repayments* Monthly Annual
Credit card debt repayments $ ____________ $ ____________
Other debt repayments $ ____________ $ ____________
Subtotal $ ____________ $ ____________
Deposits to Savings** Monthly Annual

401(k) retirement plan $ ____________ $ ____________
403(b) retirement plan $ ____________ $ ____________
457 plan/deferred comp. $ ____________ $ ____________
Other retirement/pension plans $ ____________ $ ____________
College savings plan $ ____________ $ ____________
Automatic investment savings plan $ ____________ $ ____________
Other (bank savings accounts, etc.) $ ____________ $ ____________
Subtotal $ ____________ $ ____________
* Use the Credit Card and Other Debts worksheet in the Appendix to detail your debts.
** Use the Savings & Investment Worksheet in the Appendix to get a full picture of what you’re saving
and where.
401(k) & 403(b)s What’s one of the additional $51,000 (Investment Company
FYI best ways to build your wealth? Institute). Ask your employer about what re-
Contribute to a qualified retirement tirement plans may be available to you or
plan. These programs, common- talk to a financial advisor.
ly known as 401(k)s and 403(b)s, are offered Are You Among the Savings Couch Potatoes?
by employers to their employees. In most About 30% of people in their 40s (and 27%
cases, you can contribute non-taxed dol- of people in their 50s) have not saved any
lars to these plans and the investment earn- money for retirement (American Savings &
ings grow tax-deferred. Here’s the benefit of Education Council).
saving in a 401(k) or 403(b) compared to a What $1,000 Invested Can Yield One thousand
regular taxable savings account. If you were dollars may not sound like much, but if you
to invest $3,000 in a regular taxable invest- were to invest that amount each year over
ment account each year over the next 25 the next 10 years, you would have close to
years, it would grow to about $152,000. But $15,000 at the end of that period, assuming
if you were to invest that same $3,000 each you earned 8% average annual interest. If
year over 25 years in a 401(k) or 403(b), it you saved $1,000 each year over 30 years,
would grow to about $203,000—an the figure climbs to about $113,000.
33
Actual Spending & Savings Summary
Let’s summarize your actual spending and savings. Fill in the blanks below.
Monthly Annual
Total Actual Spending $ ___________ $ ____________
(add all subtotals from all categories except Credit Card
Repayments and Deposits to Savings)
Total Credit Card and Other Debt Repayments + $ ___________ $ ____________
(see subtotal)
Total Deposits to Savings (see subtotal) + $ ___________ $ ____________
Grand Total Actual Spending & Savings = $ ___________ $ ____________

(add Spending, Credit Card Debt Repayments,
and Savings from above)
Figuring Unaccounted Expenses (or Deficit Spending)

Now, let’s take a look at whether you have any “Unaccounted Expenses.”
Monthly Annual
Net income $ ___________ $ ____________
Grand Total Spending & Savings (from above) - $ ___________ $ ____________
Unaccounted Expenses (or Deficit Spending) = $ ___________ $ ____________
Dealing with Unaccounted Expenses

Your Unaccounted Expenses represent the amount of money you have not accounted
for in the spending, savings and credit card debt categories listed earlier. Think of it this
way: you have a certain amount of income coming in every month. That money must be
going somewhere, either to spending, savings or credit card repayments.
If Your Unaccounted Expenses is a Negative Figure (You are Deficit Spending)
If your Unaccounted Expenses is a negative number, chances are you are outspend-
ing your income and taking on more debt. To make sure this isn’t an error, re-check the
expenses you have entered to make sure you have not made a mistake. If you find a mistake,
recalculate the Unaccounted Expenses (or Deficit Spending) figure above. If your expenses
still exceed your income, you are in a Deficit Spending situation. You will clearly need to
reduce your spending in order to keep from going deeper into debt.
Of course, another way to achieve balance between your income and your spending is
to increase your income. You may choose to do this by taking a second job or asking for a
raise. However, cutting spending is almost always the easiest and most immediate way to
balance income and spending.
34
If Your Unaccounted Expenses is a Positive Figure
What if the total of your expenses is less than your net income? This would indicate
that you have money left over each month. That money may be staying in your checking
account or maybe you are putting it into savings. If this is the case, congratulations. You are
living beneath your means and setting aside funds for the future.
However, if you do not see extra funds piling up in your checking or savings accounts—
and this is more likely the case—it probably means that you are spending this unaccounted
money but cannot identify where. These are expenditures you may have forgotten about or
do not have a record of. Having a large amount of unaccounted expenses is a serious prob-
lem. It means money is slipping through your fingers that you are not aware of spending. It
will help to do some investigative work to find out where this money has been going before
you design your new budget plan. Otherwise, you may design a budget that is unrealistic
and impossible to stick to.
Your goal should be to get your Unaccounted Expenses to no more than 5% of your
gross income. To figure this amount, multiply your annual gross income from page 14.
Annual Gross Income $ ____________

Multiply by .05 x.05 $ ____________
Maximum Unaccounted Expenses =$ ____________
Ideally, you do not want your unaccounted expenses to exceed this figure. If they do,
go back through the spending (and saving) categories and do the best you can to identify
additional expenditures that should be placed in those categories. We know—this is a bit
painful. But, the lower your Unaccounted Expenses, the better your final budget will be.
Make sure you enter your final Unaccounted Expenses figure on the previous page.
Are you ready to move on? Have you been able to get your Unaccounted Expenses to
less than 5% of your gross income? If so, it’s time to move on.
But first, take a moment to go back and compare your estimated spending and savings on
page 24 to your actual spending and savings. How far off were you? What have you learned?
35
Comparing Your Spending to Others
Before going on to preparing your final budget, you may be wondering how your over-
all spending compares to others’. Let’s take a look. Listed below is the percentage the
average American family spends in certain key categories. For example, the average family
spends slightly more than 30% of their total spending on housing and utilities and nearly
17% on food. Your spending needs may be different, of course, but you may find it interest-
ing to note how your spending compares to others. You may or may not choose to change
your spending patterns based on this information.
To complete the chart below, simply put in your Actual Spending Subtotals from the
Actual Expenses Worksheets in the first column. Then, divide your annual actual spending
in that category by your Total Actual Spending (first figure on page 34) to generate the
figure for the second column. For instance, if you actually spend $7,000 per year on trans-
portation and your Total Actual Spending is $50,000, then your actual spending as a % of
total spending for the transportation category would be 14% ($7,000 divided by $50,000).
Compare that percent to the U.S. average. Are you surprised?
Category Your Actual Spending Your Actual US average*

Spending as a % of Spending as a % of
Total Spending Total Spending
Housing and Utilities 30.3%
(add these two categories)
Transportation 19.1%
Food 16.8%
Clothing & Personal Care 5.7%
Entertainment/hobbies 5.3%
Education/child care 1.5%
Payments to others 3.2%
Health care 5.4%
Insurance premiums 1.0%
* These averages are based on the Consumer Expenditure Survey conducted by the Bureau
of Labor Statistics, which measures American spending habits.
36
Part 4
Designing Your New Budget
37
Designing Your New Budget
All of the work that you have done so far—estimating your spending, entering your
actual expenses, and comparing your spending to other Americans—will prepare you for
designing a new spending plan for yourself and your family. By deciding in advance how
you want to spend your money, you can allocate it appropriately across the budget subcat-
egories and avoid impulse purchases that leave less money for the things you really want.
By the way, your budget does not have to be overly restrictive. You can build impulse
purchases into it, if you want. If you know that you can never get out of Costco without
spending an extra $20 on books or CDs, you can build those purchases into your budget
and not feel guilty about making them. In fact, the key to a successful budget is to make
it realistic so it reflects your actual spending patterns, but in a way that keeps your income
and spending in balance.
Current Spending vs. Future Goals
One of the goals of this Budget Kit is to help you decide between current spending
and future goals. As you’ll see, you always have a choice. No one is forcing you to set aside
savings for retirement. But if you don’t do it, you may be forced to live a less comfortable
life than if you decide to forego a few current pleasures today in exchange for a bigger nest
egg tomorrow. The same concept applies to any goal, whether it’s a weekend getaway that
you want to take in three months or a comfortable retirement in 30 years. In order to assure
that adequate funds will be there, you may need to cut current spending in the interest of
future goals. Delayed gratification is hard for everyone, but it’s better than no gratification
at all. And now that you’ve examined your actual spending patterns, you may have seen
that a lot of the things you spend money on don’t really provide much gratification. After
you cut them from your budget, you may not even miss them.
What Are Your Financial Goals?
It will be easier to forego present spending in the interest of future goals if you know
what those goals are. When you know what you’re working toward, you can cut back
on current discretionary spending without it feeling like a sacrifice. You can make the
conscious choice: would I rather eat out for lunch every day or brown bag it in order to save
$25 each week and take a vacation at the end of the year?
Financial goals can take many forms, from a purchase you want to make within the
next six months to retiring in 30 years with a comfortable income. Your goals should be
specific and attainable and not dependent on uncertain windfalls like lottery winnings or
a big inheritance. In addition to writing down the goal and the amount of funds needed,
also estimate the approximate time frame and how you plan to acquire the necessary funds.
For example, let’s say you want to take a family vacation next summer that will cost about
$2,000. Where will that money come from? Do you expect a bonus between now and then?
38
If not, how much of your income will you need to set aside to accumulate the $2,000? Will
you need to cut spending in other areas in order to save that amount? Clearly defining
your goals and the path you intend to take to achieve them will make it easier to plan your
spending in advance and to cut frivolous spending from your budget. When you see a clear
choice between, say, daily restaurant lunches or a week’s vacation with your family, you can
decide if the eventual payoff is worth the present sacrifice. If not, you can simply continue
eating out every day. But, if the vacation is important to you, you’ll know that you made the
choice of a brown bag lunch for a reason.
Saving for Retirement
Sound retirement planning is about making sure that when you retire, you have enough
money each month to live on. Financial experts say that during retirement you will need
about 70% of your pre-retirement income. Let’s do a ballpark estimate of how much you
should be saving to make sure you retire right.
Of course, planning for retirement is not a one-size-fits-all exercise. The purpose of the
following “Ballpark Retirement Estimate” worksheet is to give you an idea of the savings
you need to be making today to meet your retirement goals.
39
Ballpark Your Retirement Needs
1. How much total annual income (all income before taxes) will $ ___________
you want in retirement? (Figure at least 70% of your current annual
gross income just to maintain your current standard of living.)
2. Subtract the total income you expect to receive annually from:
Social Security—If you make under $25,000, enter $8,000; -$ ___________

between $25,000—$40,000, enter $12,000; over $40,000, enter
$14,500 (For married couples—the lower earning spouse should
enter either their own benefit based on their income or 50% of
the higher earning spouse’s benefit, whichever is higher.)
For a more personalized estimate, enter the appropriate benefit
figure from your Social Security statement which you can get
from the Social Security Administration
(1-800-772-1213, or www.ssa.gov) Your Social Security statement
will provide a personalized benefit estimate based on your actual
earning history.
Traditional Employer Pension—a plan that pays a set dollar amount -$ ___________
for life, where the dollar amount depends on salary and years of
service (in today's dollars)
Part-time income -$ ___________
Other -$ ___________
This is how much you need to make up for each retirement year: =$ ____________
40
Now, you want a ballpark estimate of how much money you’ll need in the bank the day you
retire. So the accountants went to work and devised this simple formula. For the record, they
figure you’ll realize a constant real rate of return of 3% after inflation, you’ll live to age 87, and
you’ll begin to receive income from Social Security at age 65. If you anticipate living longer than
age 87 or earning less than a 3% real rate of return on your savings, you’ll want to consider
using a higher percentage of your current annual gross income as a goal on line 1.
3. To determine the amount you’ll need to save, multiply the $ ___________

amount you need to make up on line 2 by the factor below.
Age you expect to retire: Your factor is:
55 21.0
60 18.9
65 16.4
70 13.6
4. If you expect to retire before age 65, multiply your Social +$ ___________
Security benefit from line 2 by the factor below.
Age you expect to retire: Your factor is:
55 8.8
60 4.7
5. Multiply your retirement savings to date (You can get this figure -$ ___________
from the subtotal of your Retirement Accounts on page 16) by the
factor below.
If you want to retire in: Your factor is:
10 years 1.3
15 years 1.6
20 years 1.8
25 years 2.1
30 years 2.1
35 years 2.8
40 years 3.3
Total additional savings needed at retirement: =$ ____________
41
Don’t panic. Those same accountants devised another formula to show you how much to
save each year in order to reach your goal amount. They factor in compounding. That’s
where your money not only makes interest, your interest starts making interest as well, creat-
ing a snowball effect.
6. To determine the ANNUAL amount you’ll need to save, multiply the TOTAL additional
savings needed at retirement by the factor below.
$ _____________
If you want to retire in: Your factor is:
10 yrs. .085
15 yrs. .052
20 yrs. .036
25 yrs. .027
30 yrs. .020
35 yrs. .016
40 yrs. .013
See? It wasn’t impossible or even particularly painful to figure out what you should be
saving each year for retirement. And the sooner you start, the better off you’ll be.
The Ballpark Estimate is designed to provide a rough estimate of what you will need to
save annually to fund a comfortable retirement. It provides an approximation of projected
Social Security benefits and utilizes only one of many possible rates of return on your
savings. Ballpark reflects today’s dollars and does not account for inflation; therefore, you
should recalculate your savings needs on a regular basis and as your salary and circum-
stances change. You won’t want to stop with the Ballpark Estimate; it is only a first step in
the retirement planning process. You will need to do further analysis, either yourself using
a more detailed worksheet or computer software, or with the assistance of a financial
professional. Reprinted with permission from the American Savings Education Council at
www.asec.org.
42
Saving for Other Goals
Perhaps retirement isn’t the only financial goal on your mind. Perhaps you’d like to
dazzle up the house with new furniture, buy a new car, or pay for a wedding on the hori-
zon. To help you think about how much you need to save—depending on how far away the
goal is—we’ve created the simple chart below. For example, let’s say you want to go on a
trip to Europe at an estimated cost of $10,000. You’d like to take the trip in five years. Your
savings goal is $10,000. If you go to the $10,000 column and go down to five years, you
can see that you need to save about $151 each month to get there.
Amount of $1,000 $5,000 $10,000 $25,000 $100,000

Savings Goal
Years Away Monthly Savings Required

1 $83 $417 $833 $2,083 $8,333
5 $15 $75 $151 $377 $1,508
10 $6 $31 $61 $153 $610
20 $2 $11 $22 $54 $216
Note: The above figures assume that the money saved is deposited or invested and earns the following
rates of return: 0% for one-year goals; 4% for 5-year goals; and 6% for 10- and 20-year goals.
Setting Your Goals

Now that you’ve taken a look at how much you need to save, let’s put those amounts
into a new Goal Worksheet. Why is this so important? Because studies show that we’re
much more likely to reach our goals if we write them down. Think about your goals and
write them down on the next page, striving to be as detailed as you can. List the goals in
the order of their priority. Refer to these goals whenever you need some motivation to save
or when you’re tempted to spend money impulsively.
43
Goal Worksheet
Your Name: Today’s Date:
Name of goal Amount When you hope How you plan to achieve this goal
of funds to achieve this (e.g., year-end bonus, save $200 per
required goal month, side job)
Short-Term Goals (1-2 Years)
Example: 12 months— Save additional $50 per month.
Summer vacation $1,200 next July Repair neighbor’s fence for $600.
Medium-Term Goals (2-5 years)
Long-Term Goals (5+ years) ___________
44
Reviewing and Revising Your Goals
Periodically, you’ll want to review your goals to see how you’re doing. One reason for
reviewing your goals is so you can feel good about accomplishing them. It’s natural to take
the things we have for granted, but if you go back and recall when you wanted a nicer car
or a new living room couch and then realize that this Budget Kit enabled you to have those
things, you receive tangible confirmation that your budgeting efforts are paying off. You
will see that smart spending really does help you acquire the things you want in life. Also,
looking back on goals that you’ve accomplished helps you appreciate them more. Going
through life with a sense of appreciation and gratitude leads to even more confidence,
happiness and prosperity.
Another reason for reviewing your goals is that you may want to change them. Goals
should never be cast in stone but are constantly being revised as you go through life. As
your needs, wants, and priorities change, feel free to change your goals accordingly.
45
Creating Your New Budget
Congratulations! You’re doing a great job! You have already discovered how your esti-
mated expenses and savings compare with your actual expenses and savings. You’ve also
been able to see how your spending compares to others. You also now know where your
money is actually going. And, you’ve identified your future goals, which will help motivate
you to save. Now, it’s time to think about where your money should be going. You are ready
to adjust your spending and design your new budget. Now, you will:
• Make reasonable cuts in what you are spending in various categories in order to
free up money to put into savings or repay debt.
• Use the money-saving tips to help you make cuts and generate savings in each
spending category. Companies like SmartPrice, for instance, can now help you get
unbiased recommendations on the lowest priced long distance phone provider.
• If you want, you may shift expenditures among spending categories to reflect your
true priorities on how you want to live your life. But remember that, overall, you
should try to make cuts in your spending in order to free up money to put into
savings and/or debt repayments.
Before starting to build your new budget, a few words about having the things we want
versus having the things we need.
Wants vs. Needs
How much of your spending is for things you want versus things you need? We do
not mean to suggest that you should deprive yourself of all of life’s pleasures and cut your
budget to the bone in order to save for the future. But, if you are looking for ways to cut
expenses, you might start by taking a close look at wants versus needs. It’s easy to get these
mixed up.
Having a budget will motivate you to make the distinction between wants and needs.
If there are only so many dollars allocated to the food category, for example, you’ll be sure
to buy essential items like milk and eggs before splurging on filet mignon and a $20 bottle
of wine. In this example, it’s easy to see that milk and eggs represent needs while steak and
wine represent wants. Sometimes the distinctions are not so clear-cut. When considering
an expenditure ask yourself:
• Is this something I need or something I want?
• If it feels like a need, how did I get along without it before?
• It it’s a want, which would give me more pleasure: spending the money on it now
or saving the money to spend on something else in the future that I might want
even more?
46
• How will I feel after I’ve bought it: glad to have it, or sorry I spent the money?
• Can I afford it? Is it in the budget? If I buy it, how much will I have left in that
category to spend on things I really need or may want more?
You can make up your own questions to help you make spending decisions when you’re
being tempted at every turn. The point is to be consciously aware of your motivations and
to avoid impulse purchases that feel good for just a moment but leave you with less money
to spend on things you really need.
Reducing Spending with Money-Saving Tips
In preparing your budget, you’ll want to make your best attempt to cut your monthly
spending in all categories, except Deposits to Savings and Credit Card and other Debt
Repayments (You’ll notice that you will not see those categories on the following pages
until later).
To help you make cuts, you’ll notice simple tips at the bottom of each page of the
New Planned Spending Worksheets that can help you save hundreds—even thousands—of
dollars. Your goal should be to reduce spending on the things you might want but don’t
really need so that you can generate savings. These savings can then be used to reach your
financial goals outlined earlier, such as saving for retirement or paying off credit card debt.
To begin, look back at your actual spending for each category in the Actual Expenses
Worksheets. Enter the subtotal for each category in the Actual Subtotal line in the New
Planned Spending Worksheets. For example, if your actual spending for housing totaled
$1,000, enter $1,000 in the Actual Subtotal line in the New Planned Spending Worksheet
for Spending on Housing. Then, for each subcategory, look at what you have actually spent
(again, by going back to the Actual Expenses Worksheets, beginning on page 27). And,
consider whether you can reduce any spending in these subcategories. Use the tips provided
at the bottom of the worksheets. Write in your new planned spending figure for each
subcategory. (Remember, just as when you were entering your actual spending, you will
have some expenses that occur monthly, some quarterly and perhaps some annually. Our
best advice is to calculate the expenses in each subcategory for a full year and then divide
the total by 12 to figure your average monthly spending.)
47
New Planned Spending Worksheets
House mortgage payment or rent $ ____________ $ ____________
Property taxes $ ____________ $ ____________
Other $ ____________ $ ____________
Other $ ____________ $ ____________
Planned Subtotal $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________

Planned Subtotal -$ ____________ $ ____________
Reduction in Spending (Actual minus Planned) =$ ____________ $ ____________
48
Eliminating Mortgage Insurance
People who do not put the standard 20% down on a home will typically pay for
what’s called “private mortgage insurance” (PMI). This generally runs a couple of
hundred dollars a month. After a home appreciates in value so that there is at least 20% equity
in the home, the homebuyer should contact the mortgage company about terminating the PMI
payments.
Reduce rent or mortgage payments
Consider refinancing your mortgage at a lower interest rate. Compare lenders’ rates and terms
and only refinance if you plan to stay in the house long enough to recoup your up-front refi-
nancing costs (points, loan origination fees, appraisal and document fees). Always pay your
mortgage on time to avoid steep penalty fees. Consider having your mortgage payments taken
automatically from your paycheck or checking account; depending on your lender’s policies,
this may even allow you to save on mortgage payments.
Lower rent and invest in your home
If you rent an apartment on a month-to-month basis where the landlord imposes automatic rent
increases, consider moving to a place owned by a landlord who may be less likely to increase
the rent. Or, offer to do some work around the apartment in order to avoid rent increases. If
possible, stretch to buy a home or condo so that you can quit paying rent to someone else and
start building equity in your own home. A home is often the most important “investment” you
will make in your life.
Lower insurance premiums
Lower homeowner’s or renter’s insurance costs by installing a security alarm and smoke detec-
tors. Consider raising your deductible to reduce insurance premiums. Take advantage of policy
discounts by having your home and car insurance with the same insurer. Always review your
car insurance policy to ensure that you are given all the discounts you deserve such as good
driver discount, anti-lock breaks, door locks, and so on.
Get repairs done for less
Get competitive bids before hiring contractors to do work on your home. Contractors often
raise or lower their bids depending on their workload. Finding one who’s between jobs is the
best way to get good work at a reasonable price.
Save on furniture, appliances, and accessories
Find out when furniture goes on sale and wait to buy. Look for furniture clearances. Go to garage
sales to get good stuff at low prices. Use more creativity than money when accessorizing.
Lower cleaning costs
Do routine cleaning yourself and save your cleaning budget for major work such as carpet
cleaning and window washing. Or, consider hiring a college student who will do your routine
cleaning for less than you would pay a professional cleaning service.
49
Electricity $ ____________ $ ____________
Gas $ ____________ $ ____________
Water/sewer $ ____________ $ ____________
Trash pickup $ ____________ $ ____________
Cable $ ____________ $ ____________
Telephone $ ____________ $ ____________
Cell phone $ ____________ $ ____________
Internet $ ____________ $ ____________
Other $ ____________ $ ____________
Other $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________

50
Cut your electricity bill
Ask your utility company to do an energy audit to identify the major causes of elec-
tricity usage in your home—and then cut back in those areas. Consider replacing
old appliances with newer energy-efficient ones. Try the new generation of compact fluores-
cent bulbs; they may use 70 percent less electricity and last up to 10 times longer than incan-
descent light bulbs.
Reduce your long distance phone bill
Do not assume that the long distance phone company you are using is the best or most
economical for you. Go www.smartprice.com to get an “objective” recommendation on the
cheapest long distance phone service based on your personal usage patterns. Users of Smart-
Price save up to $400 per year on average. If your cell phone has a wide calling area, make
your long distance calls with your cell phone instead of your landline. Or, buy long-distance
calling cards with rates as low as 3 cents a minute. All these steps can dramatically reduce you
long distance bills. Also check your phone bill and see that you are not paying for features you
do not need or use, like call forwarding or three-way calling.
Get the best deal on cell phones
Shop around at a place like www.point.com for the least expensive cell phone plan that best
meets your calling needs. Continually re-evaluate your usage; if you are paying for more minutes
than you regularly use or you are now making in-state calls when you were making national
calls, change your plan as soon as you can do so without penalty.
Surf the Internet for less
Shop around for the lowest-cost Internet service provider. Get the speed you need and nothing
more. Rather than getting your Internet services from a different company, check out compa-
nies that offer telephone, cable and Internet services in a package.
Cut cable costs
If you’re still paying for premium services that you got free during a promotional period, cancel
them and only pay for what you actually use. Consider cable TV in conjunction with your
other entertainment expenses. If paying an extra $10 per month for HBO saves you $40 at the
movies (including popcorn), it’s worth it!
Lower heating bills
Lower your heating bills in the winter by having your furnace serviced in the fall; replace the
filter every few months.
Watch water usage
Install low-flow showerheads and take short showers. Run the dishwasher and washing
machine only when full. When watering your lawn, it’s better to water for longer periods less
frequently.
51
Gasoline $ ____________ $ ____________
Other $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________


Meals out $ ____________ $ ____________
Other $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________

52
Pay less when buying a car
Consider refinancing your car loan if interest rates have dropped since you took
out your car loan. When buying a new or used car, use the car-buying guides that
can be found at www.edmunds.com. Go into the dealer knowing what you should really be
paying for the car, and don’t be fooled by sticker prices or promotional events. Also use the
Internet to find out what cars are selling for in your area. Buy your car in a county with a low
sales tax—each 1% you save in taxes on $15,000 equals $150. In addition to the purchase
price, also consider the cost of maintaining the vehicle over its lifetime, including gasoline,
repairs, and insurance.
Save on automobile insurance
To reduce your car insurance costs, consider raising your deductible. Also take advantage of
policy discounts by having your house and car insurance through the same insurer. Eliminate
coverages you may no longer need. If you have an old car, consider dropping collision insur-
ance. If you are no longer driving as much, call your insurer and see if they offer a low mileage
discount. Avoid traffic tickets. Yes, the fine hurts, but the impact on your insurance premium
is the real killer. Always try to go to traffic school rather than paying the ticket since, in some
jurisdictions, going to traffic school eliminates the violation from your record.
Reduce spending on parking, tolls, and Auto Club fees
Check your auto insurance policy to see if it covers roadside emergency service and towing; if
so, consider canceling your Auto Club membership. However, if you use Auto Club discounts,
keep your membership and get the most out of the discounts by always asking for the AAA
discount at hotels, restaurants, entertainment centers and other transportation means, such
as trains. Ask your human resources manager about any savings programs your employer may
offer for telecommuting or using public transportation.
Chop your grocery bill
Use coupons, but only for items you use regularly. Spend five minutes on Sundays tearing out
food coupons and save an average $5 a week—more than enough to pay for the newspaper.
Don’t forget to use loyalty cards that provide discounts at large grocery store chains. Cut back
on purchases from higher priced convenience stores.
Eat out for less
Reduce the number of meals you eat out and save money on special nights out
by using 2-for-1 discounts like those found in the Entertainment coupon books at
www.entertainment.com. Save $10 per week on eating out and you’ll have $520 at the end of
a year. This amount, if invested each year for the next 30 years at a 6% annual return, would
result in a nest egg of $41,000! And please—forget buying fancy bottled water—this is one of
the greatest marketing hypes in history.
53
Spending on Clothing and Personal Care Monthly Annual
Clothes, shoes $ ____________ $ ____________
Other $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________

Spending on Entertainment,
Hobbies and Gifts Monthly Annual
Holidays/Christmas, birthday gifts* $ ____________ $ ____________
Other $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________

* See the Gift Giving Worksheet in the Appendix.
54
Get more style for less money on clothes and shoes
Avoid fads. Pick a color scheme for your wardrobe and buy classic pants, skirts,
shirts, and sweaters that all go together and won’t go out of style. Buy quality
clothes that will hold up through many washings; in the long run you’ll spend less than if you
buy cheaper items that look good when new but wear out fast.
Cut dry cleaning/laundry bills in half
Look at labels and avoid buying clothes that require dry cleaning—especially on items that will
need cleaning after just one wearing, such as light-colored blouses.
Save on haircuts, cosmetics
Pick a hairstyle that doesn’t need frequent trims. If you’re used to buying department store
cosmetics, try some of the less expensive drug store lines—you may find they work just as
well. Ask yourself if you really need a manicure or pedicure weekly; can you stretch it for
another week?
Get deals on gym membership, classes
Be sure to get any special gym club rates that might be available such as half price for a
spouse or 15% off for signing up a friend. Better yet, invest in some basic exercise equipment
and eliminate ongoing gym fees.
Compare prices
If you’re looking for a particular product, visit www.bizrate.com to compare prices and find the
best place to buy.
Enjoy quality entertainment for less
Go to the matinee instead of the evening showing of first-run movies. Use the local library
rather than the local bookstore. Trade books and CDs with friends. Find low-cost hobbies such
as painting, gardening, exercising, or cooking. If you’re good at something, consider turning
your hobby into a small business so that you can generate income and write off expenses.
Make a date great without blowing your wallet
Instead of spending a lot of money on dates, find creative ways to enjoy your time together.
Take a walk in a pretty place, such as a park or a historic neighborhood; it’s free and it will give
you plenty of time to talk. Or pack a nice picnic dinner and eat together in a quirky place, like
your apartment building rooftop or stargazing in a park. Show off your cooking skills and then
pull out that game of Scrabble or Monopoly that’s been sitting in the closet for years. One of
the best places to hear music on the weekend for free is in one of the large bookstore chains.
Reduce spending on holiday, birthday gifts
Shop for Christmas in July—or whenever you see things on sale. Keep loved ones in mind
whenever you go shopping and pick up gifts throughout the year. Set and stay within your
personal limit on gifts using the Giving Gifts Worksheet in the Appendix. See if your family and
friends would be open to only buying gift for the kids. For close relatives, suggest that each
person draw a name to give a gift to so that everyone has to buy only one gift instead of having
to buy gifts for all of the relatives.
55
Vacations $ ____________ $ ____________
Other $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________


Other $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________

56
Great vacations for less
Travel on off-peak days. Buy airline tickets in advance. Shop the Internet to find
the best fares and prices. Focus on free or low-cost attractions such as beautiful
public parks. Buy simple-preparation food at the grocery store rather than eating out for every
meal while traveling. Always ask for discounts on hotels and rental cars. Remember to ask your
hotel if it is partnered with any airlines for frequent flyer rewards.
The RV vs. hotels
Have you ever thought about putting the family in an RV (recreation vehicle) and driving to
some destination for a vacation? You can save a bundle. In fact, a family of four can save up to
70% compared to taking a cruise or flying somewhere and staying in a hotel.
Save on college costs
Seek out all the grants and scholarships available. Visit www.collegeboard.com or www.ed.gov
to learn more about scholarships and other financial aid. Consider a community college for
the first two years to save on overall university expenses. Start saving for college as soon
as possible using tax-favored accounts such as 529 plans and Coverdell Education Savings
Accounts. For information on your state’s 529 program, visit www.collegesavings.org.
Quality child care for less
Juggle parent work schedules to reduce childcare expenses. Consider a healthy senior who
can double as a housecleaner and would love to care for a child. Evaluate your real need
for two incomes—after taxes and child care expenses the second income may provide less
than you think. If your employer offers a flexible spending account (FSA), you may be able to
save about 30% on child care or care for an aging parent. Check with your human resources
department for details.
Help allowances go further
Teach your kids good money-management skills and help them stretch their allowances by
comparing prices and avoiding impulse purchases. The habits they develop now will stay with
them for a lifetime. Consider getting them a debit card that limits the amount they can spend
and teaches them about routinely paying their bills.
57
Alimony $ ____________ $ ____________
Charitable contributions* $ ____________ $ ____________
Other $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________


Prescriptions $ ____________ $ ____________
Other $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________

* See the Charitable Giving worksheet in the Appendix.
58
Alimony is tax deductible
If paying alimony, don’t forget to deduct it from your gross income on your tax
return. If, for example, you are paying $10,000 in alimony per year and are in the 30
percent tax bracket, you can save approximately $3,000 in taxes.
Make your charitable dollars go further
Plan your charitable giving in advance so you won’t fall for telephone and direct-mail pitches
by charities that may not meet your criteria for good works and efficient money management.
Some people try to give 10% of their income to charity and make helping others an important
part of their own lives. Regardless of what you give, make sure you know the organizations you
are giving to. A good rule-of-thumb for charities is that at least 60% of their money should be
used for program activities. See the Charitable Giving Worksheet in the Appendix.
Save on health insurance
Pick the right health insurance for your needs. If you seldom get sick, a high-deductible policy
may be the best option for you. If you need a particular high-cost prescription drug, find a
policy that will cover it. Coordinate policies with your spouse so you are getting the best cover-
age at the lowest price. If you plan to leave your job, begin the search for low cost replacement
health insurance early. COBRA insurance (which allows you to stay with your employer’s health
plan for up to 18 months at your own cost) is often very expensive.
Save on prescription drugs
Always ask for the generic equivalent. It’s much cheaper. Consider buying prescription
drugs over the Internet or by mail order to reduce costs. Although the legalities are unclear,
some people are even buying their drugs from Canadian companies, like Canada Drugs at
www.canadadrugs.com, where costs for prescription drugs can be considerably cheaper.
Save on medical services and supplies
Stay healthy by eating right, exercising, and avoiding bad habits such as smoking and drinking.
Floss and otherwise take care of your teeth regularly to avoid high-cost dental work.
Use a flexible spending account to save up to 30%
Consider signing up for a flexible spending account (FSA) at work. You do not pay tax on
the money diverted from you paycheck into these special accounts, which you can use to
pay for health care expenses such as deductibles, doctor visit co-payments, contact lenses,
chiropractic care, and much more. If you are in the 30 percent tax bracket, an FSA will save
you $300 in taxes for every $1,000 you spend for eligible expenses. For more information,
visit www.wageworksmarket.com or speak with your company’s human resources benefits
manager.
59
Life $ ____________ $ ____________
Disability $ ____________ $ ____________
Long-term care $ ____________ $ ____________
Other $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________

Miscellaneous Spending Monthly Annual

_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
Actual Subtotal $ ____________ $ ____________

60
Eliminate unnecessary insurance
Don’t pay for insurance you don’t need. You don’t need rental car insurance if
damages are already covered by your auto insurance or credit card policy. You don’t
need travel insurance if your health insurance covers travel-related illnesses or accidents.
Disability insurance for less
Disability insurance can be expensive, but you can reduce costs by buying a policy with a
longer waiting period before benefits begin (be sure you have an emergency fund to cover
expenses in the meantime). A disability policy that kicks in when you are unable to perform
your “own occupation” is more expensive than one that pays only if you can’t do “any occupa-
tion.” If you are willing to change careers, opt for the cheaper policy.
Life insurance for less
Buy term instead of whole life insurance. Consider dropping life insurance altogether when you
have no dependents relying on your income or your heirs are already adequately provided for.
Long-term care insurance for less
Carefully choose your long-term health care policy so it includes the benefits you will likely
need, but not so many that the insurance policy becomes prohibitively expensive. Since you
will be paying premiums for a long time, do not buy long-term care insurance until you are at
least 50. Do a cost/benefit analysis of each policy feature, such as the waiting period before
benefits begin and the maximum amount of coverage, and strike the right balance between
benefits and costs for you. Consider purchasing long-term care for an aging parent who might
otherwise become financially dependent on you in the future.
Shop competitively for insurance
To obtain competitive quotes on life, auto, and home insurance, visit Insweb at
www.insweb.com. For health insurance, visit www.ehealthinsurance.com.
Subscriptions and memberships may be deductible
Don’t forget that newspaper subscriptions and memberships to professional organizations
might be deductible if your employer does not reimburse you for them and if they are neces-
sary to your job. Talk to an accountant.
61
Summary of Spending Cuts Monthly Annual
Total Accumulated Cuts from Spending $ ____________ $ ____________

(add up all reductions in spending from all categories in
Planned Spending Worksheets)
Percent Reduction in Spending __________ %

(Total Monthly Accumulated Cuts from Spending divided by
Total Monthly Actual Spending—first figure on page 34.)
The higher the percentage, the more you have succeeded in reducing your spending and
freeing up money for the other things you want in life.
Congratulations on making cuts in your spending. Hopefully, the amount of money

(surplus) you’ve generated by making these cuts can be used to pay off credit card debt
and/or increase deposits to savings. This will always be the case, unless you were in a deficit
spending situation on page 34. If your Unaccounted Expenses on page 34 was a positive
number, you should go directly to the section labeled If You Have Generated a Surplus with Cuts
in Spending on the next page.
However, if you were in a Deficit Spending situation on page 34, you’ll first want to see
if you’ve made enough cuts to eliminate your deficit spending and generate any surplus.
Let’s take a look.
Monthly Annual
Total Accumulated Cuts from Spending $ ____________ $ ____________
Deficit Spending (taken from page 34): -$ ____________ $ ____________
Amount of Surplus (+) or Deficit (-) : $ ____________ $ ____________
If the above calculation produces a positive number (or surplus) go to the If You Have
Generated a Surplus with Cuts in Spending section on the next page. If it produces a negative
number, go to the next section.
62
If You Still Have a Deficit—Making Further Reductions
If the above calculation produces a negative number (or deficit) it means that, despite
your cuts in spending, you’re still in a Deficit Spending situation. Even with your cuts, you
will still be spending more than you are earning. And, if you continue to spend more than
you take in, you’ll increase your debt, incur more interest charges, and drive down your net
worth. To get your spending under control, go back through the spending categories in the
previous section and try even harder to cut expenses.
If, despite all your spending cuts, you still have a deficit, then you will have to reduce
your current Credit Card and Other Debt Repayments or Deposits to Savings on the page
that follows. But remember, by doing so you will be reducing your net worth. If, after
reducing your Credit Card Repayments and Deposits to Savings, you still remain in a defi-
cit situation, you can go on and complete your budget. But know that you will be over-
spending every month and driving yourself further into debt. There will be a category at
the end of your budget to enter your monthly and annual deficit spending.
If You Have Generated a Surplus with Cuts in Spending
If you have a positive figure for Unaccounted Expenses on page 34 and succeeded
in making any reductions in your spending, you have generated a surplus. Next, you’ll
be asked to allocate this surplus to paying down credit card debt and/or increasing your
deposits to savings.
Allocating Your Surplus to Increase Net Worth
If you have generated a surplus by making cuts, this surplus is now yours to allocate
how you see fit. But you should remember those important goals you outlined earlier. How
you choose to allocate your surplus is up to you. However, for most people, we recommend
that you distribute your surplus in the following way:
• First, maximize contributions to your 401(k) or 403(b) to the extent that they are
“matched” by your employer.
• Second, pay off all credit card debt, beginning with the card with the highest
interest rate. However, be sure to continue making at least the minimum monthly
payments on all cards.
• Third, increase your deposits to savings.
• Fourth, allocate what is remaining to those spending categories that reflect your
priorities.
63
Allocating Your Surplus from Spending Cuts (or Further Reducing Your Deficit)
Make sure that you allocate your entire surplus to increasing Credit Card Debt Repay-
ments and/or Deposits to Savings.
If you are in a deficit situation, make reductions in your Credit Card and Other Debt
Repayments or Deposits to Savings to try to reduce your deficit. After you have done this,
recalculate your Deficit on page 62.
Credit Card & Other Debt Repayments Monthly Annual

This category includes only those amounts going toward reducing existing debt. It does not
Actual Subtotal -$ ____________ $ ____________
Increase (or reduction) -$ ____________ $ ____________
Deposits to Savings Monthly Annual

401(k) retirement plan offered by employer $ ____________ $ ____________
403(b) retirement plan for govt/non-profit employees $ ____________ $ ____________
457 plan/deferred comp offered by employer $ ____________ $ ____________
Actual Subtotal -$ ____________ $ ____________
Increase (or reduction) -$ ____________ $ ____________
64
Max-Out Your 401(k), 403(b)
Whenever possible, you should put the maximum amount allowable into your
401(k) (offered by companies) or 403(b) plan (offered by government/non-profit
employers) for three reasons:
• Your employer may “match” your deposits. For instance, for every $1 you deposit,
your employer may put in 50 cents.
• The portion of your salary that goes into your 401(k) or 403(b) account is not included
in your taxable income for the year; your employer's match is also not currently taxable.
• Earnings generated in these accounts grow on a tax-deferred basis.
The Minimum Payment Trap
Avoid the trap of making only minimum payments on your credit card debt. This creates a
never-ending cycle of more interest charges and more debt. For every $5,000 in credit card
debt, making only the minimum monthly payments will cause you to pay over $15,000 more in
interest alone! (assuming a 19% interest rate)—Wouldn’t you rather spend that money on an
education for your kids, your retirement, or a vacation?
Getting Out of Credit Card Debt
Use the Credit Card & Other Debts Worksheet in the Appendix to help you get a complete
picture of your debts. Follow these tips to get out of credit card debt:
• First pay off the card charging the highest interest rate.
• Consider getting a home equity line of credit to pay off your credit cards. You may get
a lower interest rate and the interest may be tax deductible. But be sure to make your
payments on time in order to protect your home
• Negotiate a lower interest rate with your credit card issuers; if you've
been a long-standing customer they may lower the rate to keep your business.
Contribute to an IRA
There are two types of IRAs (Individual Retirement Accounts): a traditional IRA and the Roth
IRA. Both have special tax advantages that can help you save for retirement, depending on
your income and other factors. You have until April 15th of each year to make a contribution to
your IRA. For tax years 2003 and 2004, you may contribute up to $3,000; for 2005-2007, you
can contribute up to $4,000. Most brokerage firms, mutual funds, and financial institutions
offer IRAs or talk to a financial advisor to find out which is best for you.
65
Planned Spending Summary Monthly Annual
Total Planned Spending $ ____________ $ ____________
(add up subtotals in all planned spending categories
except Credit Card and Other Debt Repayments and
Deposits to Savings)
Planned Credit Card/Other Debt Repayments +$ ____________ $ ____________
(from page 64)
Planned Deposits to Savings +$ ____________ $ ____________
(from page 64)
Grand Total Planned Spending & Savings =$ ____________ $ ____________
Putting the Final Touches on Your Final Budget

Now, you are ready to fill in the blanks for your final budget. Essentially, all you are
doing is taking your final Planned Spending figures from the prior Planned Spending
Worksheets and putting them into your final budget. If you want, you can also calculate
the percentage of your total spending that is going into each final planned spending cate-
gory in order to compare your spending with that of other Americans. We provide a chart
of what the average American family spends in various categories on page 73.
You’ve worked hard to prepare this budget. Hopefully, you feel a sense of accomplish-
ment. You now have a document that you can use to educate your family and build your
financial future. Of course, the real test comes when you actually start following your
budget.
It’s tough to break old habits. Change is always hard. But if it results in less worry and
greater financial security, it’s worth it.
If, in practice, your new budget proves overly restrictive, don’t get discouraged. You
have the ultimate power to change it! Just remember what you’ve learned with the Budget
Kit about balancing your income with your spending—and you’ll be on your way to a
budget-free life.
66
New Budget
67
New Budget
Please enter the amounts you now plan to spend in each category and subcategory.
House payment or rent $ ____________ $ ____________
Property taxes $ ____________ $ ____________
Other $ ____________ $ ____________
% of Total (Subtotal divided by Total Planned Spending,
which is first figure on page 66) __________ %

Electricity/Gas $ ____________ $ ____________
Water/sewer $ ____________ $ ____________
Trash pickup $ ____________ $ ____________
Cable $ ____________ $ ____________
Telephone $ ____________ $ ____________
Cell phone $ ____________ $ ____________
Internet $ ____________ $ ____________
Other $ ____________ $ ____________
% of Total (Subtotal divided by Total Planned Spending) __________ %
68
Gasoline $ ____________ $ ____________
Other $ ____________ $ ____________

Meals out $ ____________ $ ____________
Other $ ____________ $ ____________
Spending on Clothing and Personal Care

Clothes, shoes $ ____________ $ ____________
Other $ ____________ $ ____________
69
Spending on Entertainment, Hobbies and Gifts Monthly Annual
Holidays/Christmas, birthday gifts $ ____________ $ ____________
Other $ ____________ $ ____________

Vacations $ ____________ $ ____________
Other $ ____________ $ ____________

Other $ ____________ $ ____________

Alimony $ ____________ $ ____________
Charitable contributions $ ____________ $ ____________
Other $ ____________ $ ____________
70
Prescriptions $ ____________ $ ____________
Other $ ____________ $ ____________

Life $ ____________ $ ____________
Disability $ ____________ $ ____________
Long-term care $ ____________ $ ____________
Other $ ____________ $ ____________
Miscellaneous Spending
Monthly Annual
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
_______________________________________________ $ ____________ $ ____________
71
Spending on Credit Card & Other Debt Repayments Monthly Annual
This category includes only those amounts going toward reducing existing debt. It does not
Deposits to Savings Monthly Annual

401(k) retirement plan $ ____________ $ ____________
403(b) retirement plan $ ____________ $ ____________
457 plan/deferred comp. plan $ ____________ $ ____________
Unaccounted Expenses Monthly Annual

(See figure from page 34. If figure is positive, +$ ____________ $ ____________
enter it here. If negative, enter 0.)
Grand Total Planned Spending & Savings

(add all Planned Subtotals from pages 68-72 =$ ____________ $ ____________
and Unaccounted Expenses.)
Deficit Spending Monthly Annual

Complete this section only if you are spending more than
you are earning.
Enter your deficit from page 62 $ ____________ $ ____________
72
Comparing Your Planned Spending with Others
See how your planned spending compares with other American families. To complete
the chart below, simply put in your Planned Spending Subtotals from your New Budget
(starting on page 68) in the first column. Then, divide your annual actual spending in
that category by your Total Planned Spending (first figure on page 66) to generate the
figure for the second column. For instance, if you plan to spend $7,000 per year on trans-
portation and your Total Planned Spending is $50,000, then your Planned Spending as
a % of Total Spending for the transportation category would be 14% ($7,000 divided by
$50,000). Compare that percent to the U.S. average.
Category Your Planned Your Planned US average*

Spending Spending as a % of Spending as a % of
Total Spending Total Spending
Housing and Utilities 30.3%
(add these two categories)
Transportation 19.1%
Food 16.8%
Clothing & Personal Care 5.7%
Entertainment/hobbies 5.3%
Education/child care 1.5%
Payments to others 3.2%
Health care 5.4%
Insurance premiums 1.0%
* These averages are based on the Consumer Expenditure Survey conducted by the Bureau
of Labor Statistics, which measures American spending habits.
73
74
Part 5
Keeping Your Budget
on Track
75
76
Keeping Your Budget on Track
Don’t let up now! All of your efforts will be down the drain if you fail to keep your new
budget on track.
Monitoring Your Spending
Just as the goal of a diet is to develop consistently good eating habits, the goal of this
Budget Kit is to make disciplined spending become an ingrained habit. Eventually, you may
not need to fill out worksheets or monitor your spending. Once you get into a rhythm, you
will automatically know how much you are able to spend in the various categories without
exceeding your income. But until that day arrives, you will need to monitor your spending
to make sure you are sticking to your budget.
Another reason for tracking your expenses is to see if you need to make any adjustments
to your budget. If you set ambitious spending goals and find that you can’t adhere to them,
the problem may not be with your spending but with your goals. For example, if you cut
way back on groceries so your family can take a nice vacation next summer, you may find
that you simply can’t keep your food spending under the limit you have set for yourself. In
that case, you’ll need to cut yourself some slack in the food category and plan a shorter or
less lavish vacation. Expect to go through a certain amount of trial and error until you get
it right. But whatever you do, don’t abandon your budget just because it’s not working the
way you expected. Small adjustments here and there may be all it takes to get it back on
track.
How to Use the Budget Tracker
On the following pages, you’ll see the Budget Tracker. Here you will enter your actual
expenses and savings for the next year. Save your credit card statements and receipts
throughout the month. At the beginning of each month, sit down and write in what you
spent in each category for the previous month. Then, total your monthly spending and
see how it compares to your planned spending. Are you over, meaning you’ve spent more
than you planned for that month? Or, did you spend less than you planned? Remember
that the monthly spending figure in your planned budget is an “average” monthly figure.
In some months, you will go over your budget, just because quarterly or semi-annual bills
come due. In others, you will be under budget for the same reason. But, over the course
of several months these expenditures should average out. Tracking your expenses will also
allow you to make necessary adjustments as required. For example, perhaps you spent more
than you planned on entertainment one month. Next month, you might choose to cut back
in entertainment and/or other areas. Use this Budget Tracker with family members. Let
them see for themselves how spending today will impact future goals.
77
Budget Tracker housing, utilities & transportation
January February March April May
Housing
House Payment or Rent
Homeowners or renters
insurance premiums
Condo or association dues
Property Taxes
Maintenance, repairs
and improvements
Furniture, appliances,
accessories
Cleaning Services
Other
Utilities
Electricity
Gas
Water/sewer
Trash pickup
Cable
Telephone
Cell Phone
Internet
Other
Transportation
Car loan or lease payment #1
Car loan or lease payment #2
Automobile insurance
Car registration
Gasoline
78
Budget Tracker housing, utilities & transportation
June July August September October November December Annual
Housing
Utilities
Transportation
79
Budget Tracker food, personal care, entertainment & travel
Repairs and maintenance

Parking, tolls, auto club
Public transportation
Other
Food
Groceries & household items
Snacks, beverages
Meals out
Other
Clothing and Personal Care
Clothes, shoes
Dry cleaning/laundry
Haircuts, cosmetics
Gym membership, classes
Other
Entertainment, Hobbies and Gifts
Concerts, theater, other
entertainment
Music lessons, CDs, books,
other hobbies
Holidays/Christmas,
birthday gifts
Other
Travel
Vacations
Weekend getaways
Other
Other
80
Budget Tracker food, personal care, entertainment & travel
Food
Clothing and Personal Care
Entertainment, Hobbies and Gifts
Travel
81
Budget Tracker education, childcare, health & insurance
Education and Childcare

Private school or college tuition
Allowance for student(s)
away from home
Student loan payments
Child care
(preschool, babysitter)
Other
Payments to Others
Alimony
Child support payments
Charitable contributions
Other
Healthcare
Health insurance
Medical services and supplies
Dental insurance
Dental services and supplies
Prescriptions
Other
Insurance Premiums
Life
Disability/Long-term care
Other
82
Budget Tracker education, childcare, health & insurance
Education and Childcare
Payments to Others
Healthcare
Insurance Premiums
83
Budget Tracker misc. spending, debt repayments & savings
Miscellaneous Spending Cont.
Credit Card and Other Debt Repayments
Deposits to Savings
401(k) plan offered by employer
403(b) plan for govt./non-profit
employees
457 plan/deferred comp offered
by employer
Other retirement plans
College savings plan
Automatic investment
savings plan
Other
GRAND TOTAL
SPENDING & SAVINGS
Grand Total Planned
Spending & Savings (from page 72)
Increase (or Decrease) from
Planned Spending ±
84
Budget Tracker misc. spending, debt repayments & saving
Miscellaneous Spending Cont.
Credit Card and Other Debt Repayments
Deposits to Savings
85
86
Appendix—
Helpful Forms & Worksheets
87
Credit Card & Other Debts
To help you get a complete picture of your credit card and other debts, list them in
the worksheet below. If you are able to make more than the minimum payment, always
put the extra payments toward the credit cards with the highest interest rates. Also, if you
have enough to completely pay off some of your debts, pay off those with the highest rate
first. At all times, make sure you make at least the minimum payment on all debts to avoid
penalties and negative marks on your credit report. But, don’t get caught in the trap of only
making minimum payments as this will result in potentially thousands of dollars in extra
interest payments over time.
Include below all your debts except your home mortgage. These include credit cards,
car loans, personal loans, department store/merchant cards, etc.
Creditor Account Number Interest Minimum Due Date Balance

Rate Monthly Due
Payment
Total Credit Card and Other Debts
88
Giving Gifts
Giving gifts makes us feel good, but when we fail to set limits, we may end up spend-
ing more than we really can afford. Use the worksheet below to help you plan your gift
giving consistent with your other financial goals. Once you determine how much you plan
to spend for gifts each month, incorporate this figure into the gift subcategory in your final
budget.
Name Birthday Birthday Christmas Other Other Total

Amount Amount Holiday Amount
Total Gifts
89
Savings & Investment Accounts
Use the worksheet below to get a complete picture of your savings and investment
accounts, including retirement accounts, real estate, and bank or brokerage accounts.
Account Holder Name (You, Spouse, other):
Name of Company Holding Account Account Type Account Number Current Value
Cash (Savings, Checking) Accounts

$
$
$
$
Investment Accounts
$
$
$
$
Retirement/Pension Accounts
$
$
$
$
Other Accounts
$
$
$
Real Estate Owned
$
$
$
Total Investment Accounts $
90
Account Holder Name (You, Spouse, other):
Name of Company Holding Account Account Type Account Number Current Value
Cash (Savings, Checking) Accounts

$
$
$
$
Investment Accounts
$
$
$
$
Retirement/Pension Accounts
$
$
$
$
Other Accounts
$
$
$
Real Estate Owned
$
$
$
Total Investment Accounts $
91
92
Charitable Giving
Many Americans ”tithe” or give 10% of their income to charitable causes. Use the work-
sheet below to help you plan your charitable giving throughout the year. First, decide how
much you want to give. Then decide to whom you want to give. Put the amount in the
monthly or annual column as appropriate.
Total amount of my gross income I wish to give is: __________ %
This represents $ ____________

(Multiply your gross income by the percentage figure above).
Organization Monthly Amount Yearly Amount Donation

Month
Total Charitable Giving
93
94
About Jennifer Openshaw
Jennifer Openshaw, CEO of Family Financial Network, is a nationally
recognized author, financial expert and TV commentator. Her smart
money advice has been seen by millions of Americans on Oprah, CNN,
NBC’s “The Other Half,” CNBC’s “Power Lunch,” CBS’s “Early
Show” and many other programs. Jennifer is the consumer columnist
for CBS MarketWatch and served as the money expert for KCBS-TV in
Los Angeles and as a money editor for Child magazine. Jennifer speaks
nationwide to groups ranging from students at Harvard to employees
of Ford Motor Company. She is author of the book and host of the
Public Television show, “What’s Your Net Worth?” Jennifer holds a
Masters in Business Administration (MBA) from UCLA.
What Others Say:
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• WORKBOOK •

At familyfn.com, you’ll find tools to

• Money Tips—Free, accessible articles—featuring advice seen on Oprah and

• The Money Buddy Program—Learn to work with a Our No-Hassle

Copyright 2004 Family Financial Network

Printed in the United States of America.

Thanks to Elaine Floyd for articulating our commitment to unbiased ﬁnancial

To Tom Houston, whose passion, patience, intelligence, and editorial skills

Part 1—What Is Your Net Income and Net Worth? ..............................................13

How much do you really have to spend? .............................................................................. 14

Part 2—Estimating Your Spending ...................................................................... 21

Estimating your expenses .....................................................................................................22

Part 3—Examining Your Actual Spending Patterns ............................................ 25

Examining your actual spending patterns .............................................................................26

Part 4—Designing Your New Budget .................................................................. 37

Current spending vs. future goals .........................................................................................38

Part 5—Keeping Your Budget on Track ............................................................... 75

Monitoring your spending .....................................................................................................77

Appendix—Helpful Forms & Worksheets ............................................................. 87

Credit card & other debts ......................................................................................................88

For many, the word “budget”

Step 2 Quickly estimate what you’re spending and saving.

Using the CD &/or Workbook

*The maximum annual Social Security tax for 2004 is $5,450.

What’s Your Net Income?

What’s Your Net Worth?

Retirement Accounts You Spouse Total

Other Investments You Spouse Total

Liabilities (what I owe)

Your Current Net Worth

Clothing/personal care $ ____________

Education/child care $ ____________

Payments to others $ ____________

Health care $ ____________

Insurance premiums $ ____________

Miscellaneous expenses $ ____________

Credit card and other debt repayments $ ____________

Deposits to savings $ ____________

Yes _________ No ___________

Now, let’s move on and examine your actual spending.

Spending on Housing Monthly Annual

Spending on Clothing and Personal Care Monthly Annual

Spending on Entertainment, Hobbies and Gifts Monthly Annual

Spending on Education and Child Care Monthly Annual

Spending on Health Care Monthly Annual

Miscellaneous Spending Monthly Annual

Chances of Becoming Disabled If you Insuring your wedding Strange as it sounds,

Deposits to Savings** Monthly Annual

Grand Total Actual Spending & Savings = $ ___________ $ ____________

Figuring Unaccounted Expenses (or Deﬁcit Spending)

Dealing with Unaccounted Expenses

Annual Gross Income $ ____________

Category Your Actual Spending Your Actual US average*

2. Subtract the total income you expect to receive annually from:

Social Security—If you make under $25,000, enter $8,000; -$ ___________

Part-time income -$ ___________

3. To determine the amount you’ll need to save, multiply the $ ___________

Total additional savings needed at retirement: =$ ____________

Amount of $1,000 $5,000 $10,000 $25,000 $100,000

Years Away Monthly Savings Required

Setting Your Goals

Medium-Term Goals (2-5 years)

Yes _ No ___

Grand Total Actual Spending & Savings = $ _ $ __

Actual Subtotal $ $

Actual Subtotal $ $

Actual Subtotal $ $

Actual Subtotal $ $

Actual Subtotal $ $

Actual Subtotal $ $

Actual Subtotal $ $

Actual Subtotal $ $

Actual Subtotal $ $

Actual Subtotal $ $

Actual Subtotal $ $

Actual Subtotal $ $

Total Accumulated Cuts from Spending $ $