budget gives you records of your income vice your expenses and helps you manage your financial affairs. If you’re married, budgeting involves both you and your  spouse.  For  married  couples,  handling  money matters  is  a  joint  effort.  With  two-income  families, money  management  is  a  different  ball  game.  The yours-mine-ours approach usually comes up, requiring definite  understandings.  Certain  inherent  expenses become greater when both the husband and wife earn wages. Couples also need to have an understanding as to what expenses they will pay from what funds. A written budget, properly prepared and followed, helps couples work out these problems. In budget preparation you determine income and expenses; examine spending habits; and see what, if anything, you need to correct or improve. To help you improve your spending habits, you need to be familiar w i t h  t h e  f o l l ow i n g  t e r m s  u s e d  i n  fi n a n c i a l management: Gross  income.    The  total  amount  of  pay  before  any deductions. Deductions.  The amount of money taken from pay for income taxes, Social Security, Service Group Life Insurance(SGLI), and so forth. Allotments.   The money taken from gross income for savings, checking accounts, family support or to pay debts, such as car payments and debts due the United States. Net  income.    The money paid to a member after all deductions and allotments are paid. Also known as take-home pay. Fixed expenses. Expenses that are the same each month. Flexible  or  variable  expenses. Expenses  that  are different each month. 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 optional income. This is the income available for planning purposes, which you can apply to variable or flexible expenses. These expenses include items such as savings, food, utilities, entertainment, clothes, and gifts. When preparing a budget, plan for savings first. Planning for savings first is important. If you save first, then you can plan your budget and still save money. Everyone needs a savings program for unforeseen expenses in the future. In addition, using a systematic, planned savings program will help you to achieve set goals. In determining how much to save, have a realistic percentage of your optional income. This percentage could be as little as 5% to 10% or as high as 20% of your optional income. After savings comes a fixed expense, followed by variable  expenses.  The  U.S.  Department  of  Labor suggest these percentage 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, you should keep close track of your income, expenses, and savings for several months. This information will help you understand your spending habits. It will also help you determine average non-fixed  expenses.  Understanding  your  spending habits puts you in a position not only to budget your income but also to correct undesirable spending habits. Plans for spending extend to many areas and vary according to the person’s status and requirements. The basics of spending are to spend money wisely and in as small amounts as possible. INVESTMENT RULE OF 72 What is the rule of 72? The Rule of 72 gives you an easy method of estimating the number of years it takes for an investment’s value to double at a specific interest rate or rate of return. The general formula for the Rule of 72 is as follows: 17-12 Student Notes: Fixed Expenses Variable Expenses Housing 25% Food 23% Transportation 9% Clothing 11% Gifts and contributions 5% Savings and unforeseen expenses 22%