Spending & Budgeting Back »

Written by Carrie Johnson (former SDSU Extension Family Resource Management Specialist).

Setting financial goals and creating a budget/spending plan are necessary when managing your money. It is the only practical way to get a grip on your spending and to make sure you are spending money on the things that you should be.

Financial goals should be set prior to creating a budget/spending plan (the terms budget and spending plan are used interchangeably in SDSU Extension resources). Goals are the items you need and want for you and your family. When creating goals work together as a family and prioritize them.

The creation of a budget generally requires three steps:

  1. Determine what money (income) you have on a monthly basis. Income can be from more sources than just work. However, don’t count on windfalls when creating your budget.

    Salaries & Wages: This is any income received from a job after all of deductions (net pay).

    Interest & Dividends: Includes any interest and dividends received from bank accounts and investments.

    Other Income: Include ALL income in a household budget. This includes items such as child support, Social Security Income, TANF, SNAP, etc.

  2. Calculate what your monthly expenses are. What do you spend money on every month? Categorize your spending to see where you should be spending your income. There are three types of expenses: fixed, flexible, and occasional.

    Fixed expenses: expenses that are the same every month. They are typically contractual (loans from a bank) and can be difficult to change the amount paid. Some examples would be mortgage, rent, auto loans, or savings goal. Pay Yourself First, make saving a fixed expense to make sure that money is being put in an emergency fund.

    Flexible expenses: expenses that you pay every month but vary in amount. For example, food and clothing are considered flexible expenses.

    Occasional expenses: expenses that are fixed or flexible, but do not occur every month. Examples are gifts, subscriptions, and insurance premiums not paid monthly. Set a dollar amount on birthday and holiday gifts and stick to it.
    To calculate how much to set aside every month for occasional expenses, take the entire amount spent each year and divide that by 11 to determine how much to put in savings every month. Dividing by 11 rather than 12 allows flexibility in case there is one month that you fail to save.

  3. Track your spending and make adjustments to your budget. Your budget is a working document. You will need to not only determine what you should be spending money on and categorize it, but also track what you actually spend and stop any spending leaks. Are there ways you and your family can cut expenses?

SDSU Extension has developed some resources to assist you in setting financial goals and creating a budget (below). You can also see the Goal Setting & Budgeting page for more assistance.


Useful Websites

  • MyMoney.Gov: Explore the collection of financial information from trusted resources.  It contains information based on where you are in life—from birth of a child to retirement.
  • eXtension: An interactive learning environment delivering the best, most researched knowledge from the best land-grant university minds across America. eXtension connects knowledge consumers with knowledge providers - experts who know their subject matter inside out. These resources are brought to you by the Cooperative Extension System and your Local Institution.
  • Smart About Money: Whether you open your wallet or not, you make decisions about money every day. Even with limited resources there are ways you can slowly and steadily prepare for the future. Learn how a solid spending plan will help you see where your money is going.
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