Financial Literacy for Everyone

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Need to determine which car you can afford? How to save for a goal? Explore these calculators to help plan for your future.

Live Within Your Means

Sometimes you may find you are spending more than you're saving and steadily going deeper into debt as a result. This is an easy and common pattern to fall into, and one that requires some planning and discipline to reverse.

The first step is creating a budget. Creating a budget is nothing more than examining your income and expenditures to determine exactly how much money you have coming in and where you’re spending that money.

Once you've got a clear understanding of your current budget, your challenge is to find places where you can spend less (or earn more) to achieve your financial goals. Here are some steps you can take toward that end:

1. Question Your Needs And Wants

What do you want? What do you really need? Evaluate your current financial situation. Take a look at the big picture. Make two lists – one for needs and one for wants. As you make the list, ask yourself:

  • Why do I want it?
  • How would things be different if I had it?
  • What other things would change if I had it? (for better or worse)
  • Which things are truly important to me?
  • Does this match my values?

2. Set Guidelines

We all have different budgets based on our needs and wants. But the idea is to understand how much you spend on different items and set your budget according to how much you have to spend and what’s important to you.

3. Track, Trim And Target

Once you start tracking, you may be surprised to find you spend hundreds of dollars a month on eating out or other flexible expenses. Some of these are easily trimmed. Cutting back is usually a better place to start than completely cutting out. Be realistic. It will help you to be better prepared for unexpected costs.

The SMART Way to Trim Expenses

In finding ways to trim flexible expenses, it helps to have a goal to save toward each month. Setting such a goal needs to be SMART:

SPECIFIC Smart goals are specific enough to suggest action. Example: Save enough to visit Rome for your wedding anniversary. Not just "save money."

MEASURABLE You need to know when you achieved your goal or how close you are. Example: A trip to Italy costs $4,000, and you have $800 saved.

ATTAINABLE The steps toward reaching your goal need to be reasonable and possible. Example: I know I can save enough money each week to purchase that trip to Italy.

RELEVANT The goal needs to make sense. You don't want to work toward a goal that doesn't fit your need. Example: We would like to stay in four-star hotels in celebration of our anniversary.

TIME-RELATED Set a definite target date. Example: I want to go to Italy by next summer.

This chart shows some rough guidelines on how much of your income should go toward different expenses. If you live in an area where transport is higher than normal or rents/mortgage are higher, you may need to make adjustments. Also, if you would like to add a section for gifts, or something else, then you'll need to subtract from another area.

Smart Spending Budget