Fixed expenses include rent and mortgagepayments and time payments for expenses suchas autos, furniture, and insurance. The differencebetween fixed expenses and net income isdiscretionary income. This is the income availablefor planning purposes, which personnel can applyto variable or flexible expenses. These expensesinclude items such as savings, food, entertain-ment, clothes, and gifts.When preparing a budget, personnel first needto consider savings. Planning first for savings isimportant. When personnel plan to pay expensesfirst, they usually find they have no money leftfor savings.Everyone needs a savings program for unfore-seen expenses in the future. In addition, using asystematic, planned savings program will helppersonnel achieve set goals. In helping your peopledetermine how much to save, recommend theysave a realistic percentage of their discretionaryincome. This percentage could be as little as 5 to10 percent or as high as 20 percent of thediscretionary income.After savings comes fixed expenses, followedby variable expenses. The U.S. Department ofLabor suggests these percentages of take-homepay for budget preparation:FIXEDEXPENSESVARIABLEEXPENSESHousing25%Food23%Transportation9%Clothing11%Gifts andcontributions5 %Miscellaneous5%Savings andunforeseenexpenses22%These percentages are approximate and willvary from area to area and person to person.To prepare a personal budget, personnelshould keep close track of their income, expenses,and savings for several months. This informationwill help them understand their spending habits.It will also help them determine average nonfix-ed expenses. Understanding their spending habitsputs personnel in a position not only to budgettheir income, but also to correct undesirablespending habits.Plans for spending extend to many areas andvary according to the person’s status and require-ments. The basics of spending are to spend moneywisely and in as small amounts as possible.Use of CreditCredit has its base largely on trust. Theaverage person in the Navy is trustworthy andexpects to receive a fair deal in business andfinancial dealings. Conversely, the way personnelhandle their private financial affairs provides areliable sign of their general character andtrustworthiness.When we speak of credit, we usually think oftime payment purchases or charge accounts.Actually credit consists of a much broader scope.The entire country runs on credit, includingindustries; banks; and local, state, and federalgovernments. In fact, if credit were to stopsuddenly, the result would be catastrophic. Forexample, almost no one would be able to buy ahome, an automobile, furniture, or a televisionor stereo set. Without these sales, unemploymentwould skyrocket. These salaries, not available forthe retail market, would in turn adversely affectthe sale of other goods. The effect would continuefrom the highest to the lowest level, and economicchaos would result.USE OF CREDIT BY NAVY PERSON-NEL. —The Navy expects all its members todischarge their financial responsibilities in a timelymanner. The Navy expects its members to striveto avoid any discredit upon themselves or thenaval service. A good knowledge of credit willallow them to better handle their financial affairsand often save money.Navy personnel have special problems notfaced by the public in borrowing money. If Navypersonnel are to use credit wisely, they need toknow the ABCs of credit. They especially needto know how to avoid some of the problemsyoung Navy men and women often have.PRINCIPLES OF CREDIT. —Credit literallymeans buy now, pay later. The system permits usto purchase goods as we need them, but pay forthem over a certain period. Credit means youreceive a loan of money, and you always payextra when you borrow money. Credit, if you useit wisely, ensures a reasonable standard of living.However, you cannot substitute credit for soundfinancial planning and a systematic savings plan.Additionally, improper use of credit can createa financial nightmare that can adversely affectyour job, family life, and mental and physicalhealth.4-14
Integrated Publishing, Inc. - A (SDVOSB) Service Disabled Veteran Owned Small Business