Your Destination: To reach your financial goal, you will need a budget. Budgeting is the process of planning how to spend your money.
Travel Kit: Have an accurate knowledge of all your income and expenses. Stay informed. See handout: Convert Your Weekly Income into a Year-Long Plan
On the Path: Calculating your income and expenses is important so you can keep them in balance. Fixed income is constant income; for example, having a consistent salary every week. Variable income may be bonuses or extra hours worked.
How to set up a savings plan: Start now by saving a certain percentage of your allowance or income.
Step 1: Calculate your yearly income and expenses
Step 2: After coming up with a goal, calculate how much to save and spend, Complete the handout.
For example, if your allowance or income is $10 a week, try to save $1 each week (10%) and slowly work up to saving a more significant percentage. You invest in your long-term goals when you pay your savings account first.
It is recommended that you save 20% of your income. So, if your weekly income is $100, aim to save $20. Plan on saving 10% of your income in the first year and 15% in the second year. Make sure you keep going.
Things to remember as you set up a savings plan:
- Keep in mind that some goals will be achieved, and some won’t.
- Focus on your successes – even if you don’t achieve all of them, it does not mean that you are a failure; look at what you have achieved.
- If you cannot reach a goal you have set for yourself, think about why.
- Ask yourself if there was something you could have done differently or if the goal was too big.
- Make sure you are setting challenging goals, but not something too challenging where you will lose interest.
Extend Your Journey: Follow your budget!
Learn new vocabulary:
Balance – the difference between the amount due and the amount paid.
Budgeting – estimating income and expenses for some time.
Fixed expenses – costs that are consistent, like rent. Once you calculate the fixed expenses, you know how much you have left for variable costs.
Variable income – things like going to the movies, going out to eat, groceries, and car costs such as gas and maintenance.