Do you need a budget?


You already have one!

Complete Answer

Simply put, a budget is how you spend your money. If you receive money (income) and spend money (expenses) you  have a budget. What you need to develop is a “Spending Plan.” I prefer this term because budget has such a negative connotation, i.e. “that’s not in the budget”, “I can’t buy this or that”, “I can’t buy fun stuff because fun stuff is not in the budget” et cetera.

So what is your Spending Plan? Would you be able to clearly explain to someone your income and expenses for the month? You should be able to describe your Spending Plan for one month. For example, “This is the amount of money I take home (income) each month and this is how I spend the money (expenses) each month.”


Describe your Spending Plan for one month.

Do you have to know how to manage your money?


Yes, as long as you have money you should know how to manage it.

Complete Answer

Starting around the early teens, we begin to earn money and make decisions about it – how to spend our lunch money, what shoes we like, what movie we would like to see, et cetera. By the time we are adults, we have to make most, if not all of the decisions about our money. So it follows that if you will be making decisions about money, you would benefit from a basic understanding of money management, “Financial Literacy.” These decisions will impact your financial wellbeing now and in the future.

We live in a country that values freedom, and this includes freedom in the market place – we get to spend or not spend our money however we wish. This coincides with a basic tenant of the Church that we all have free will, and that includes freedom to make decisions about money. We have the freedom, as well as the right, to make our own financial decisions.


Money management skills (Financial Literacy) will help you make  prudent1  financial decisions.


Where are you spending too much money?

Question Where are you spending too much money?

Answer  Only you can answer that question.

ExampleFor one month, Adam’s (imaginary person) income was $3,600. Tracking his expenses revealed the following; housing $1,170, car $590, credit cards $525 and lifestyle $1,500.

Income Expenses
Amt. % Amt. %
Take-Home Pay  $3,600  100
 Housing Expense  $1,170  33
 Car Expense  $590 16
 Credit Card Expense  $525  15
 Lifestyle Expense  $1,500  42
 TOTALS  $3,600  100  $3,785  106

Can you identify where Adam is spending too much money?

Complete Answer  You have all the information needed to answer that question.

  1. You know how to calculate income for the month. (Post of July 18, 2016)
  2. You can track spending. (Post of August 15, 2016)
  3. You know what a typical spending plan (budget) should look like. (Post of Jul,y 25, 2016)

In the above example, Adam’s total expenses ($3,785) are greater than his total income ($3,600). Adam will eventually go bankrupt if he continues spending more than his income.

To identify where Adam is spending too much money let’s examine his spending.

  • Housing Expenses which include mortgage/rent, utilities, cable/satellite/Internet  service, cell phone, insurance, et cetera. Adam is spending 33% of his income. The recommended amount is 30% and may vary between 25% and 35%. Adam’s amount spent for housing is a little on the high side, but within the recommended amount.
  •  Car Expenses which includes car payments, gas and oil, maintenance and repairs, license plates, insurance, et cetera. Adam is spending 16% of his income. A little over the recommended amount, but close enough.
  • Credit Card Expenses are in reality debt. Credit card debt will be address in a future post. For this example, we will assume it is debt pay down. Fifteen percent is within the recommended amount.
  • Lifestyle Expenses could be classified as discretionary spending, which would include such things as dining out, clothing, entertainment, hobbies, vacations; all those things that that you enjoy and like. Adam is spending 42% of his income on lifestyle things. The recommended amount for lifestyle is 25%. Adam is spending too much money on lifestyle things.

Financial Literacy Knowledge/Skill

Identify where you are spending too much money.

Comments or Questions

Thank you for visiting the Financial Literacy Life Skill site. Please feel free to submit comments and/or questions you may have about managing your money (Financial Literacy).

Next week’s topic: What’s the difference between needs and wants?