3a  
We've examined the role of money in our lives  and learned to set
financial goals. Now we'll look at how to make an effective
spending plan. This  Spending Plan will be your best tool, use it to 
reach your personal financial goals. There's a word  that many of
us hate to hear. That word is "budget."  People think it's a bad
word because they think that a budget means being deprived  of
the things that they want. But what if it's  not about denial? What
if a budget is really  about having the power to GET the things you
want?  It's your money; you worked hard for it. You, and only you,
get to choose how to spend it. So it's  not about denying yourself
the things you want,  it's about your POWER to make choices.
Choices  that will let you get the things that mean the most  to
you!  Your right, experts agree that it helps to call it a spending
plan, instead of a budget. Remember  you're not denying yourself
or pinching pennies,  instead you're spending YOUR money
according  to YOUR plan to get what YOU want most. After
discussing personal finances with so many  people, l can tell you
that most of them never  wrote their true income and expenses
down on  paper. This left them with an inaccurate picture  of their
financial situation. And without that  knowledge, they were less
likely to achieve their financial goals.  We've said that our goals
are a map for achieving what we want. Well, a spending plan is
the vehicle that will take you on the trip! A spending plan shows
you exactly how much money you have, how much is being spent,
and WHERE it's being spent. Your spending plan allows you to be
prepared for the ups and downs in both your income and
expenses and still save for what you want most. A spending plan
puts you in control  of your money. And a spending plan also helps
you avoid using credit that doesn't serve  your goals, or spending
money you don't have.  Having an accurate view of your expenses
will  also help you to make better decisions, show  you where it’s
possible to save money, and  show you if your income and
spending is unbalanced. Step one in creating a spending plan is to
calculate exactly how much net income you have on a monthly 
basis. Let's start with the terminology. The first thing we  need to
understand is the difference between gross  income and net
income.  This is most likely a review for most of you, but  gross
income is the total amount of money you  make. Net income is
the amount you actually take  home after deductions for taxes,
insurance and  anything else that comes out of your paycheck. 
Income can differ from time to time. So it's  important to calculate
all sources of net income  to an accurate monthly average.
Averaging income  into equal monthly amounts is what gives us
control.  If you get paid twice a month, like on the first and the
fifteenth, then just take the net amount of the check and multiply
by 2 to get your monthly amount.  But, if you're paid every other
week, things are  different. Instead of getting 24 checks a year, 
you'll get 26. So to calculate your monthly average,  you must take
the NET amount of all 26 paychecks,  and then divide by 12
months. This will give you  an accurate average monthly net if
you're  paid every two weeks. Remember to include ALL  your
sources of income: Pension, retirement,  child support, and
payroll. If you have regular, steady income that  doesn't change
over the course of the year, these calculations are all you need.
But  some of you have what's called variable  income –
commissions, a seasonal second  job, bonuses, overtime or other
income  that varies in amount or frequency. Here are a few rules
for irregular income sources.  When you estimate bonuses,
overtime or  commissions, it's better to be too low than too  high.
These sources of income are rarely  sure-things, but use a number
that you feel  fairly confident that you can count on. Take  this
estimated yearly amount, and divide by 12.  This will give you a
monthly average of any  income that varies in frequency or
amount. Now that you've calculated a monthly average  of your
household's net income, the next step  is to do the same with all
of your monthly expenses. Step Two in making a spending plan is
to calculate a monthly average for everything you spend  money
on, and for your goals. It's essential to  calculate all your expenses
on a monthly basis.  There are three categories of expenses: fixed,
variable, and periodic.  Fixed expenses are ones that are the same
amount and are due at the same time, every time. Examples of
fixed expenses are things like rent  or car payments.  Variable
expenses are most of our other expenses. Things that we pay for
regularly, but that vary in amount from month to month, like:
groceries, gasoline and utilities.  The final category is periodic
expenses. Periodic expenses include medical expenses, car
repairs,  home repairs or anything that you don't have on a 
regular basis. We also want our plans to include a monthly
amount  for an emergency fund and any other goals we're 
working on. Fixed expenses are predictable. And because they're
so predictable, fixed expenses are the  easiest to plan for. Variable
expenses are a  little trickier. For example child care cost that  are
usually higher in the summer and lower  during the school year.
So, to get an accurate monthly average of a variable expense like
child care, you'd add up a year's worth of bills, and then divide by
12.  Just as with variable income, converting your  variable
expenses to equal monthly amounts  allows for accuracy. And that
creates certainty.  If you can't get the bills or find the entries in
your  checkbook, do your best to estimate.  Now, periodic
expenses are the hardest because they are unexpected expenses.
The fact of the  matter is that we should all anticipate and EXPECT
the so called "unexpected" because  Sooner or later, these
expenses will occur. We  don't plan to get sick or need to replace
the  refrigerator, but at some point we all will!  For our spending
plans to work, we need  accuracy and CERTAINTY. If we average 
everything -- both income and expenses –  accurately, then we
can be CERTAIN that  if we stick to our plan, we'll have a balanced 
budget and get where we want to be. For  instance, teachers who
have little income  during the summer know that if they spend  all
year long according to their spending  plans, then when summer
comes, they'll  have enough for their expenses. Because  they're
spending according to their PLANS, not according to what's in  the
bank. If their plans have accounted  for the months with little or
no income,  then there will be money in their account  for those
months. Since our expenses vary, and so can income, our 
spending plan has to average everything. If your utility bills go
way down in the summer, you could  think that you have all kinds
of extra money. But if  you spend according to an accurate plan,
you'll  know that it isn't "extra" money, it's money  you’re going to
NEED in the winter! So, if you  leave that “extra” in your account
you'll have  the money you need for utilities when they  increase
just by following your spending plan! In addition to balancing your
income and expenses,  a Spending Plan is the vehicle to reach
your personal  financial Goals, because it includes those goals.
Once  you've taken the time and effort to create an  accurate
spending plan you'll have the power  to reach the finish line on
your goal map. That's what a good spending plan does, it  gives
YOU power over your money. Then  all you have to do is "Stand by
your plan!" Now that we have an accurate spending plan, step
three is to track our  spending and stop money leaks!  Figuring out
where you spend your money lets you monitor yourself and make
adjustments so you can stay on your Spending plan. Tracking your
spending means you'll always know where your money's going.
Have you ever started the  week with money in your wallet and
ended up  on Thursday with no money, wondering where in the
world it went? Well, that's what happens when you have money
leaks! Money mysteriously leaks out of your wallet and the  next
time you look, it's gone! Tracking our spending helps us STOP the
money leaks that get in the way of reaching our goals and getting
what we want! The BEST way to track your spending and stop
money leaks is to write down every penny you spend, at least for
a while. It's not fun, but it's worth it! Carry a little notebook and a
pencil, and write down every penny you spend for one day. If you
get a soda out of a machine, write it down. Remember, it's only
one day and you can do ANYthing  for one day, right? You'll be
surprised at how small purchases like lunches, newspapers,
snacks, coffee, extra stops at the grocery store can add up.   Start
with one day. Then try to make it for a week, it's really best to do
it for a month, because our Spending Plan uses the monthly
measurement. An added benefit of tracking your spending is that
you'll think twice about spending money.  Remember this concept
of tracking your spending as "Track to stay on track"! I think you'll
be amazed at the money leaks you find. Okay. now, what if you
follow all the steps to make your Spending Plan accurate and you
look at it, and your income and expenses don't balance? That's
where Step Four, Review and Adjust, comes in.