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Manage Your Money With a Spending Plan

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Financial troubles can directly impact unit readiness by undermining your job performance, personal life, and potentially leading to a loss of your security clearance. This affects not only your life but also the overall readiness of your unit.

Avoid financial troubles by taking charge of your finances, creating a realistic plan, and spending less than you earn. While this plan sounds simple, overspending is common, and it’s easy to find yourself in financial trouble. The National Guard wants to help.

A spending plan provides control by outlining your income, expenses and potential areas for savings. It serves as your first step toward achieving larger financial objectives, helping you identify resources to meet your goals.

Begin by adding up your monthly expenses and subtracting them from your take-home pay. Then think about your financial priorities beyond your monthly bills, such as paying off high-interest credit card debt, building an emergency fund and saving for college or retirement.

Keep in mind that achieving these long-term goals can enhance your financial situation:

  • Paying off credit card debt provides extra cash by eliminating bills and interest.
  • Contributing to a pre-tax retirement plan reduces taxable income while growing funds for the future.
  • Establishing an emergency fund offers a financial cushion, preventing costly debt.

If you’re married, complete this action plan with your spouse. You’ll want to set goals and identify any expenses you can reduce together. This will help avoid misunderstandings or overspending.

This action plan requires six steps:

  1. Add up your monthly expenses. List the bills you have to pay every month, such as your mortgage or rent, car payment, insurance premiums, utilities and phone bills.
  2. Add up your household’s monthly take-home pay. This includes after-tax pay for you and your spouse and any other income, such as investment or rental income.
  3. Subtract your expenses from your income. If you’re close to zero or get a negative number, take a second look at your non-essential expenses, such as cable TV, entertainment and travel. These items are easier to trim if you’re spending too much or if that money is needed elsewhere.
  4. List additional financial priorities like emergency funds, credit card debt repayment, and retirement or college savings. Determine the target amount and desired timeline for each goal, then calculate monthly savings targets by dividing the time (in months) into the amount.
  5. Match your money with expenses and goals. By clearly outlining income and expenses, identify areas for trade-offs to generate extra cash and enhance your long-term financial standing. Adjust spending until you’re either spending less than your income or saving enough to meet other financial priorities.
  6. Review your plan and priorities every few months. A spending plan is a “living document” that will change with your needs and situation. Life happens. And your spending plan should be flexible enough to change with whatever comes your way.

With your spending plan in hand, Calculate Your Net Worth and take the next step to finding out where you stand financially.

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