Many people have no idea what happens to their money. It just
seems to “disappear.” Here’s how to out how where
- List the bills you pay every month.
- For one month, jot down everything you buy and the
price—no matter how little it costs.
At the end of the month, categorize the items you’ve listed:
“Food,” “Transportation,” etc. Then break down each category;
for example, “Food: School Lunches, Snacks, Restaurants.” Now
you know where your money goes.
The Urge to Splurge Advertising and peer pressure tempt
us to buy things we don’t need. Which of the items you
categorized above were things you needed, like gym shoes or
an ink cartridge? Which ones were things you just wanted:
take-out pizza or that CD you played only once? Those are
impulse purchases. They don’t seem expensive when you buy
them, but they can keep you from reaching larger goals like a
vacation, a cool car, or college.
Think Before You Buy Before you buy an item, ask
yourself whether the item is worth the time you’ll have to work
to pay for it. The better you get at saying “no” to unnecessary
spending, the more money you’ll have for what’s important
Using the expenses you listed before, complete a chart like the
one on the next page. Look at each expense in column 2 and
think of ways to reduce it. Enter the lesser amount in column 3,
your New Budget. Be sure to budget 10 to 30 percent of your
income for “Savings.” (To see why, go to Saving and Investing
Skill.) Total column 3 to see if your budget matches your
income. If not, you’ll need to keep trimming expenses until it
does or another source of income.
Personal Finance Handbook
Take control of your cash
Did you really need that cashmere sweater or those $200 sneakers? How
did you get $5,000 in debt? Getting control of what you spend—budgeting—is a
skill you’ll need throughout your life.
ETT_EM_R1_R33_FinHndbk.indd R4 2/2/10 9:56:53 AM
Building Your Budget
Part-time Job: $______
Monthly allowance: $______
Total income: $______
Spending Category Current Expenses New Budget
Restaurants & take-out
Sports and hobbies
Savings (10–30% of income)
Donations to charity
Test Your Financial Fitness
- Listing List five ways you can start saving money. How much could
you save in a year by cutting these costs?
- Explaining Why is it important to live on a budget?
- Applying Choose a career you like and research its average annual
salary. Using that salary, construct a one-year budget plan using the
budget worksheet above
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