On Your Own

When you are just starting out, money will have a greater impact on your life. If you let your finances get out of control it can haunt you for much of your adult life. This is why it is so important to start good financial habits now. Drawing up and following a budget, as well as being extremely careful not to incur unnecessary bills or credit card debt, is vital to your future financial health.

This module is designed to give you the money management tips and tools you will need to be prepared to make your own financial decisions. Learn to set realistic goals as well as establish and implement a financial plan to accomplish your objectives.

Once you have a job and know how much money you have coming in, you will be able to use this information to plan out your expenses.  The amount of money you make will dictate things such as how much you can afford for rent; whether you get a car and insurance or use public transportation; and how much money you have for luxury items like cell phones and cable TV.  You are in a unique situation as you have the luxury of planning a 90-day budget and getting feedback while you still have a good support system in place.


Budgets are simple, carefully considered plans to distribute earnings. Poor budgeting can be a major problem for young adults. If you ever want to get ahead, you've got to know what is coming in and what is going out every month - only then can you gain control over you finances. The budgeting process will assist you in breaking down your spending by category and help you set spending limits based on your income. People who get ahead and stay ahead are people who are in control of their finances. It means you are in charge!

In most cases you should open a checking account so you can pay bills conveniently.  Having to get money orders can be a hassle and it is a good idea to not carry cash which can be easily lost and often leads to over spending. Use checks or debit cards instead of credit cards. Always try to pay with cash rather than credit. Budget a certain amount of money for recreation and leisure expenses.  If the money is not in your pocket - don't buy it!

Use the following percentage guide to figure out how much money you should be spending on particular expenses. While this is only a general guide, you should strive to have your budget reflect this model.















Unplanned Expenses



Where Does the Money Go?

Keeping Track Of Your Money

If you have not started out with a budget the first step is to take time to figure out exactly how much money you spend now. Write down every cent you spend, 35 cents for the newspaper, $5 for lunch, $1 for parking, etc. If you charge an item, list it now, not when you are paying your monthly credit card bills. Items should be recorded when you make purchases. Be sure to also include large monthly payments for rent, educational loans, car payments, insurance payments and other similar expenses. Be strict with yourself. If you omit any money, the amount you spend and your budget will be imprecise.

At the end of the 30 days, review your daily expenses and see if you are surprised at the total or the number of items you purchases. Examine your spending habits to see if you are impulsively spending money or if you tend to consistently spend on the same types of things.

An Overview of the Budgeting Process

After you have tracked your spending habits for 30 days, you are ready to implement a budget. You will first have to start by keeping track of your income and writing down your fixed monthly expenses like rent, car payment, etc. Then you want to make a list of your flexible expenses like groceries, utilities, gasoline, etc. Then list discretionary expenses such as clothes, entertainment, etc. Make sure you are not leaving anything out. Include the coffee you buy every morning, newspapers, stamps, etc. The key is making sure you include everything you are going to spend money on, and since you have been tracking your funds for the last 30 days this should be easy for you to do.

When you are finished listing your expenses, add all of them up and compare it to the amount you are bringing home each month. If your expenses are less, great, you have more money to save. If your expenses are more than you are bringing home, you need to create a spending plan that permits you to reduce your debts and rethink some of your monthly expenses. Get rid of any unessential spending like eating out or expensive entertainment. Consider taking public transportation rather than owning a car. Clip coupons, buy generic products, and avoid impulse purchases. Contemplate getting a debt card and cut up and cancel your credit cards. Try to cut down your expenses. Use some of your savings to pay off debts. Withdrawing savings from low-interest accounts to settle high-rate loans usually makes sense.

For the first few months you use this management plan, think of it as a work in progress. Don't get discouraged and quit if things don't go just like you wanted them to. You may have to change some categories, add new categories, tweak the dollar amounts, or all of the above. Just stick with it. Each month, you will get better at anticipating and planning your monthly expenses. Living paycheck to paycheck, with no spending plan, no end-of-the-month summary report, no savings plan, or no idea of when you would be out of debt is not the right way to plan for the future. Do not worry about becoming a slave to your budget and savings plan. It should reflect your values and it must be compliant to your lifestyle. A budget can finally allow you to stop overspending and start saving. It will bring order and new priorities into your life.

Step-by-step Spending Plan

Implementation of a Spending Plan

Step 1 - List all sources of monthly income including gifts, bonuses, allowances, etc.


  • Pay yourself first. Set up a separate savings account once you get paid and immediately transfer a portion (start with 5% of your regular deposit amount) to the savings account.
  • Attempt to forget about your savings account in order to prevent unnecessary withdrawals. Only access the funds upon emergency.
  • Collect and write notes on your cash purchase receipts. This will help you track spending and raise awareness of your spending habits.


Step 2 – List ‘fixed’ expenses.  Expenses are separated into three categories: "fixed", "flexible", and "discretionary". Fixed expenses are necessary items that stay consistent each month and include housing, and any outstanding loans.


  • Stop use of all credit cards.
  • Close credit card accounts by returning charge cards to issuers along with a letter terminating charging privileges.
  • Put all extra income towards paying off debts.
  • Do not take on new debts - including "Consolidation loans".


Step 3 – List ‘flexible’ expenses.  Many times flexible expenses are necessary items, but what sets them apart is that you usually have control over how much money you spend on these items. These include household and grocery items, transportation, clothing, utilities, etc.


  • Sell items that you don’t use or use very little.
  • Take advantage of consignment shops, rebuilt, and used items.
  • Start doing things yourself and do not pay for services you can perform.
  • Eat out less
  • Drive less or sell your car and use public transportation – this saves car payments, gasoline, maintenance and repair.


Step 4 – List discretionary expenses Discretionary expenses are items that are not necessary for survival. If your expense to income ratio is out of balance and you are spending more money than you earn, items from this category should be eliminated or cut back. These include dining out, sporting events, magazines and newspapers, hobbies, music, entertainment, etc.


  • Begin saving one dollar-a-day and all pocket change, everyday.
  • Wait for sales.
  • Comparison-shopping sometimes can save you more than 50 percent.
  • Make two shopping trips. On the first trip compare prices, value, etc. Avoid carrying credit cards, too much cash or a checkbook on the shopping trips. The second trip is when you will actually make the purchase after having determined the best value.
  • Use coupons wherever possible and send in for rebates.


Step 5 – All expenses are totaled and then subtracted from the total income figure for the month.

Step 6 – Once all items are subtracted, the amount of money left over should be put into a category.  Start by making paying extra on credit cards and other loans and put the rest into savings.   If the expense total is greater than the income total, you are off track financially.

Step 7 – Begin to prioritize expenses. Keep track of when you use credit cards. Then ask yourself if you want to borrow every month for these expenses. Each month, enough savings should be set aside to cover fixed and some flexible expenses. This reserve method will save you from living paycheck to paycheck. Review the spending-plan each income period to start. At the end of each month, compare actual expenses against what you budgeted. As time passes, you may want to only perform this comparison on a quarterly basis.

Ways to Save Money

Used Cars

Before buying a used car: compare the asking price with the blue book price (Ask your bank or go to www.kbb.com). Have a trusted mechanic check the car, particularly if the car is sold "as is." Consider acquiring a used car from a person you know and trust. They will be more inclined to charge a lower price and point out any problems with the car.

Auto Loans

If you have considerable savings earning a low interest rate, consider making a large down payment or even paying for the car in cash. This could save you several hundred or thousands of dollars in finance charges. Shop for the cheapest loan and you may also save hundreds of dollars in finance charges. Contact several banks, your credit union, and the auto manufacturer's own finance company.

Car Repairs

Each year Americans lose billions of dollars on needless or inadequate car repairs. To save money on these repairs you must investigate and find a skilled, honest mechanic. Before needing repairs, look for a mechanic who is certified, well established, and has done good work for someone you know - Good luck!

Auto Insurance

Call the state insurance department for publications showing typical insurance prices charged by various companies. Find a licensed, low-price insurer. Call four of the lowest-priced, licensed insurers and compare what they would charge you for the same coverage. Talk to your agent or insurer about raising your deductibles on collision and coverage to at least $500, or if you have an older car, it might be wise to drop these coverages altogether. Taking these steps can save you hundreds of dollars a year.


Save over a $100 yearly in fees by choosing a checking account with a minimum balance requirement that you can, and do, meet. Banks frequently will drop or lower checking fees if paychecks are directly deposited by your employer. In addition, direct deposit offers the extra advantage of convenience, security, and immediate access to your money.


Save hundreds of dollars a year on electricity by making certain new appliances, especially air conditioners and furnaces, are energy-efficient. Information on the energy efficiency of major appliances is found on the Energy Guide Labels required by federal law. Check if your electric utility station has programs to reduce the costs of appliance purchases.



Telephone Service

Check with your phone company to see whether a flat rate or measured service plan will save you the most money. You can save money by buying your phones instead of leasing them. Check your local phone bill to see if you have optional services you don't really need or use. Each option you drop could save you $40 or more each year.

Long Distance Telephone Service

Evenings or weekend long distance calls can cost significantly less than weekday calls. If you make more than a few long distance calls each month, consider signing up for a calling plan. Call several long distance companies to see which one has the least expensive plan for the type of calls you make. Purchase and use a pre-paid calling card but be careful to use one directly from a long-distance supplier to avoid connection fees.


Turn down the heat and air conditioning.  Turn off the lights when you leave the room and use compact fluorescent bulbs.


Think about the foods that are really pleasurable to you. Don't cut corners there. But how about bottled water? Is there any difference between the brand for $1.99 and the one for $3.99? Do you really enjoy the prepared foods you buy? Could you make something fresh and simple -- and cheaper?


The biggest enemy of a clothing budget is impulse. You need a strategy. Make a list of what you need. Shop from your list. Buy the best you can afford. Think about all the stuff you have hanging in your closet.  Consider buying clothes at Ross or TJ Maxx where name brand clothing is available for a fraction of the regular cost.


A Bad Example

$5000 in debt and nothing to show for it

Hired as a co-op student at a credit union, Heather worked hard and received a promotion. She wanted new clothes for her new position, so she applied for a credit card. The credit union approved her application with a $300 line of credit...and 17-year-old Heather went shopping.

For the next six months, Heather paid the minimum monthly payment of $20. Although her payments totaled $120, her balance dropped by only $60. She realized that it would take higher monthly payments to eliminate the debt, and at the end of a year had nearly $200 of the balance paid off.  Then in spring of her senior year, Heather planned a trip to Jamaica with friends. She asked the credit union for an increase in her line of credit. Because of her successful payment history, the credit union agreed to raise her credit limit to $750. Heather was off to Jamaica, where she charged a lot to her credit card, including:  Air fare - $250, Hotel room - $100, Glass bottom boat trip - $75, Snorkeling - $50, Gifts - $50

Heather was shocked when her credit card bill arrived with a balance of $736!   For the next year, Heather maintained a cycle of paying down her credit card debt, then running the balance up again—over and over and over. She was rewarded for her payment diligence with an increase in her line of credit to $1,500. She viewed the increase as "free money" and her account balance moved up to the new limit in months.

Next, she applied for a credit card at her favorite store, which approved her for a $1,000 line of credit.  You guessed it: She celebrated by going shopping.  That's when Heather realized that she was out of control and applied for a debt consolidation loan at an interest rate lower than her credit cards' rates. The credit union approved the loan, and advised her to cut up her cards.  Heather promised not to use her cards though she didn't get rid of them. The folly of that quickly became clear when Heather's friends invited her on another trip. She didn't have the necessary cash, but she had $1500 available on her credit card. So, she took the trip...and had a blast!

Five years and two debt consolidation loans later, Heather had racked up more than $5,000 in credit card debt...and basically had nothing to show for it. In fact, technically, she was still paying for her Jamaica trip.  Heather applied for yet another consolidation loan and was denied. When she asked her grandfather for a loan, he refused. He told her that she needed to manage her money and be responsible for her own debts. Heather finally paid off her credit card balances and loans—twelve years later! Not only did she pay triple the amount charged; she was unable to save money because all her earnings were used to pay her debts.



Finance Mod 3 – Worksheet

1.     What is the maximum percentage of your budget you should spend on each of the following:

Housing ______            Transportation ______            Food _______

2.     What percentage of each paycheck should you put into savings?  ___________

3.     What is a ‘fixed’ expense? ____________________________________________________________

4.     What is a ‘flexible’ expense and why is it different that a ‘fixed’ expense?  ____________________


5.   What is a ‘discretionary’ expense? _____________________________________________________


6.   Jamaal just got a new job that will pay him $1500 monthly after taxes and wants to find a new place in Portland.  Circle the apartments that should fit in his budget according to this module?









7.   After Jamaal spent time apartment searching he found a very nice 2-bedroom townhouse a few blocks from his new job but it was $150 more than he had budgeted for housing.  What are some of his options?______________________________________________________________________







Arrange with staff-on-duty to complete the Payday Loan Trap Elective.  You will read about one person’s experience with payday loans and what they learned in the process.   Turn it in for additional credit of 1-hour.