Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
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Chapter 3: Money Management

The cornerstone of money management is a well-designed personal finance plan, as it will allow you to reach your goals and achieve financial independence – without having to sacrifice all of life’s pleasures.

(Please complete the budgeting forms below. To download the PDF, click on the yellow buttons. Please note: You will need to have Adobe Acrobat Reader installed on your computer in order to access the forms. Click here to download the free software if you don't already have it.)


Set goals

Goals are key to all budgets. An achievable goal should be:

  • Specific – Know what you want, how much it will cost, and the date you want it.
  • Measurable – Break the price down into amounts that you can regularly deposit so you can track progress.
  • Realistic – Don’t set yourself up to fail with too large a goal or too short a time frame.

Distribute your goals into time-frame categories:

  • Short-term goals – Twelve months or fewer
  • Mid-range goals – One to five years
  • Long-term goals – Five years or more

Many people will have more than one goal for each category and may not have enough money to save for all goals equally. Prioritize your goals and save for them accordingly.


Track expenses

Very few people have a good estimate on how much they really spend each month. To know, track your spending:

  • Carry a small notebook with you and record the date, item, and cost of every purchase you make.
  • Keep receipts from each purchase and tally them up at the end of the day.
  • Use checks or debit cards. With a check you have your checkbook register to keep track, with debit cards you’ll have either a written or online statement.
  • Use expense tracking software.


Construct a budget

A budget is a spending and savings plan. Your personal budget should include your income, expenses, and an action item list.

Income: The primary rule of sound financial management is expenses should never exceed income. It is important to not overestimate your income – it’s better to have money left over than be caught not being able to meet your financial obligations:

  • Include overtime income only if you are absolutely sure that it will continue
  • Include bonuses only if they are guaranteed.
  • If you are self-employed, or your income fluctuates because of commissions or seasonal variables, use the previous year’s income as a base and estimate whether you think you will be earning more or less.

Expenses: When reviewing and planning for expenses, compare what you’ve been spending – using the tracking forms – with what you plan to spend going forward.

  1. List your expenses
  2. Subtract the sum from your current income.
  3. Add in your goals – these are now an expense, so pay yourself like you would any other important bill.
  4. Adjust your budget – keep in mind that budgeting is not necessarily about reducing expenses – it can be about rearranging them too.


Action Item List

The next step is to take action. If you determine that decreasing spending will help you achieve your goals, act now to make that a reality.

If you found that your income is insufficient to pay for the expenses you consider important, consider ways to increase it:

  • Work longer hours
  • Acquire part time work
  • Ask for a raise
  • Pursue a better paying job
  • Consider selling assets

Copyright © 2007 CCCS of San Francisco