Financial Resource

Budgeting: Why & How?

By Meghan Northcutt, AFC® Candidate

“Compass rules direction; decision rules life!” –IsraelmoreAyivor

Let me introduce you to your financial compass, otherwise known as your budget! This is an amazing tool at your fingertips so that you may be guided to the financial life you want to live.


In the 2013 Economy & Personal Finance Survey, results show that 70 percent of Americans do not use a monthly budget to track their income versus expenses within their household. Budgeting comes with many benefits, such as reduced stressors, control over spending and saving, and increased financial focus.

It is recommended for everyone to have a budget. If you feel very financially stable, budgeting presents the opportunity to focus on your financial goals. If you feel somewhat stressed financially, budgeting allows the opportunity to eliminate your discretionary expenses.


There are a couple of steps involved in getting started. First, combine all of your income for the month; think of every source of money coming into your household- paychecks, child support, income from a small business…etc. Do not leave any money out of the equation. When you leave money out of the equation, it tends to “disappear”. Next, gather all of you expenses for the month; include any money outgoing- rent, utilities, groceries, debt payments, entertainment…etc. Be sure to include savings for retirement, goals, and emergencies into your expenses. Your overall goal is to allocate your money to best suit your needs and goals. Using technology such as computer software or smartphone apps may be very helpful.

When trying to reduce certain expenses in your budget, a common mistake is made by eliminating it completely which can lead to feeling as if your budgeting efforts have failed. Military LearningeXtensions suggests using the Step Down Principle to increase the rate of success. Visualize a set of stairs; when you eliminate the expense completely, it’s as if you’re hopping down all the stairs at once. With the Step Down Principle, you walk down the stairs one step at a time. For example, if you eat out four times per month but have a goal of once per month, you may start by going three times per month.Over time, reduce it to two times per month. Finally end at your goal of once per month.The entire process should take place over the course of several months. This method reduces the feeling of depriving yourself of the activity you enjoy to cut costs.

Who Can Help?

Contact your installation’s Family Readiness Center to inquire if budget workshops are currently available and to schedule an appointment with a free Financial Counselor to help create a budget. The My Military & Money smartphone app offers resources on budgeting. Ask your bank or credit union if they have online tools or smartphone apps to download that assist with budgeting and tracking purchases.


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