Monday, February 13, 2023


Chapter 2 | Setting Your Goals

Budgeting is all about getting from where you are financially to where you want to be. And in order to do that, you’ve got to decide exactly where you’d like to end up.

You’re going to start by asking yourself some hard questions.

What Do You Want?
Meet Billie DeSantos, age thirty-eight, whose budget we’re going to peek at to see how this process works.

Billie’s decided that she needs a realistic, achievable budget with some goals. To that end, she’s come up with the following list: 

  • Help the kids pay for college
  • Pay off the credit card
  • Retire
  • Put away some income in a savings account

What’s Realistic
Having set general goals for herself, Billie has to look at them again, this time with an eye to what’s realistic and reasonable.

This is what she comes up with:

  • Help the kids pay for college: Pay for half the expenses at one of the three large state universities (currently $14,500 per year for tuition, fees, room, and board) or put that same amount toward a private or out-of-state college.
  • Pay off the credit card in nine months Get the balance to zero, and then if it’s used at all, pay it off in full every month.
  • Retire from the company at age fifty (in twelve years): Billie’s current salary is $49,248 after taxes but before deductions for insurance and 401(k) contributions.
  • Save six months of income over the next twelve years. This money would be for emergencies only, not to be touched for any other expenses.

Stretch Goals
It’s a good idea to have a stretch goal — something you aspire to but only can attain by working very hard.

Ways to Reduce Debt
  • Cut down on utilities
  • Spend a maximum amount per week on groceries: Limit eating out to pizza or Thai takeout once a week
  • Eliminate the small stuff
  • Investigate car insurance options
  • Limit vacation spending

Billie’s success depended on her ability to do two important things that are essential to the budgeting process: prioritize and compromise.

Chapter One | Chapter Three

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