Manage Your Money, Lesson 5: Develop Your Budget

Ohio State University Extension/Research

Manage Your Money

Lesson 5: Develop Your Budget

MYM-5-03

When asked how much money was enough, the rich man replied, "Just a little bit more."

Most people feel no matter what their income, they need more money to meet their expenses. However, more money is not always the answer. The key lies in how you plan and then, actually spend your money.

The following practices may signal real money problems just "around the next bend." Do you:

dip into savings to pay current bills?
pay only the minimum amount due each month on charge accounts?
delay payment of some bills you normally would have paid on time?
borrow to pay for items you used to buy with cash?
take out new loans to pay old ones or to get lower monthly payments?
not know exactly where your money goes?
have less than 3 months’ expenses in an emergency fund?

street sign Even if you answered "Yes" to all of the above, don’t give up hope! You can learn ways to get more from your dollars, have greater satisfaction from your spending, and set aside money to pay bills when they are due. Of course, you must first come to grips with the fact that you have a certain amount of money available to you and you are going to live within those limits. Although this may seem an impossible task, most people really can do it.

The secret lies in knowing where you are now, where you want to go in the future, and making a plan to get there. It’s similar to charting your route to a new and unfamiliar vacation spot. You just have to figure out which roads take you to your final destination-in this case, your financial goals. Think of it as directing your dollars to reach your dreams.

A successful budget often requires difficult decisions and cooperation of all who spend the family money. Consider a few guiding principles:

Gather the entire household together and review the financial goals you set in Lesson 1. What needs to happen to reach them? It is very important that everyone affected by the plan has some say in it.

Together, decide what each person will do to help control the family spending. Review your Personal Plan and Commitment to Reduce Spending from Lesson 3. Agree within the family that everyone will take turns having their wants met but must also be willing to give up something as well. Encourage, support, and show appreciation for one another’s efforts.

Provide every family member with a personal allowance if you can. The amount must be fair, but is not as important as the freedom to spend it without answering to anyone.

Learn and practice sound decision-making and shopping skills to get the most for your money.

Make it a habit to save something, no matter how small, from every paycheck.

Learn to live within your income and keep your credit under control.

Spending Patterns

Six Steps to Your
Balanced Budget

YOU are a fixed expense:
Pay Yourself First!

Action Steps for Lesson 5

For More Information

Sources and References

Click here for the PDF version of this Lesson.

Written by Ella Mae Bard, Extension Agent in Family & Consumer Sciences, Knox Co., Carolyn McKinney, Family Resource Management Specialist, Consumer & Textile Sciences Dept., Nancy Hudson, Northeast District Family & Consumer Sciences Specialist, and Diane Johnson, Extension Agent in Family & Consumer Sciences, Darke Co., Ohio State University Extension. Portions adapted from "Managing Your Money," prepared (1994, 1996) by Eleanor Ames, former OSU Extension Agent (Madison Co.) in Family & Consumer Sciences.

For more information about family life issues, visit http://families.osu.edu

Manage Your Money is a six-part self-study course. The lessons include:

Appreciation is expressed to Marjorie McCullough, Office Associate, Consumer and Textile Sciences Department, who worked with several drafts of these materials.

This material is intended only for educational purposes. Mention of a proprietary product, trademark or commercial firm in text or figures does not constitute endorsement by Ohio State University Extension and does not imply approval to the exclusion of other products, firms, or organizations. For specific, consult your financial or legal adviser.

All educational programs conducted by Ohio State University Extension are available to clientele on a nondiscriminatory basis without regard to race, color, creed, religion, sexual orientation, national origin, gender, age, disability or Vietnam-era veteran status.
Keith L. Smith, Associate Vice President for Ag. Adm. and Director, OSU Extension.
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