Fixed expenses include rent and mortgage
payments and time payments for expenses such
as autos, furniture, and insurance. The difference
between fixed expenses and net income is
discretionary income. This is the income available
for planning purposes, which personnel can apply
to variable or flexible expenses. These expenses
include items such as savings, food, entertain-
ment, clothes, and gifts.
When preparing a budget, personnel first need
to consider savings. Planning first for savings is
important. When personnel plan to pay expenses
first, they usually find they have no money left
Everyone needs a savings program for unfore-
seen expenses in the future. In addition, using a
systematic, planned savings program will help
personnel achieve set goals. In helping your people
determine how much to save, recommend they
save a realistic percentage of their discretionary
income. This percentage could be as little as 5 to
10 percent or as high as 20 percent of the
After savings comes fixed expenses, followed
by variable expenses. The U.S. Department of
Labor suggests these percentages of take-home
pay for budget preparation:
These percentages are approximate and will
vary from area to area and person to person.
To prepare a personal budget, personnel
should keep close track of their income, expenses,
and savings for several months. This information
will help them understand their spending habits.
It will also help them determine average nonfix-
ed expenses. Understanding their spending habits
puts personnel in a position not only to budget
their income, but also to correct undesirable
Plans for spending extend to many areas and
vary according to the persons status and require-
ments. The basics of spending are to spend money
wisely and in as small amounts as possible.
Use of Credit
Credit has its base largely on trust. The
average person in the Navy is trustworthy and
expects to receive a fair deal in business and
financial dealings. Conversely, the way personnel
handle their private financial affairs provides a
reliable sign of their general character and
When we speak of credit, we usually think of
time payment purchases or charge accounts.
Actually credit consists of a much broader scope.
The entire country runs on credit, including
industries; banks; and local, state, and federal
governments. In fact, if credit were to stop
suddenly, the result would be catastrophic. For
example, almost no one would be able to buy a
home, an automobile, furniture, or a television
or stereo set. Without these sales, unemployment
would skyrocket. These salaries, not available for
the retail market, would in turn adversely affect
the sale of other goods. The effect would continue
from the highest to the lowest level, and economic
chaos would result.
USE OF CREDIT BY NAVY PERSON-
NEL. The Navy expects all its members to
discharge their financial responsibilities in a timely
manner. The Navy expects its members to strive
to avoid any discredit upon themselves or the
naval service. A good knowledge of credit will
allow them to better handle their financial affairs
and often save money.
Navy personnel have special problems not
faced by the public in borrowing money. If Navy
personnel are to use credit wisely, they need to
know the ABCs of credit. They especially need
to know how to avoid some of the problems
young Navy men and women often have.
PRINCIPLES OF CREDIT. Credit literally
means buy now, pay later. The system permits us
to purchase goods as we need them, but pay for
them over a certain period. Credit means you
receive a loan of money, and you always pay
extra when you borrow money. Credit, if you use
it wisely, ensures a reasonable standard of living.
However, you cannot substitute credit for sound
financial planning and a systematic savings plan.
Additionally, improper use of credit can create
a financial nightmare that can adversely affect
your job, family life, and mental and physical