A guide to budgeting for the young couple

a guide
budgeting
for the


young
couple


U.S. DEPARTMENT OF AGRICULTURE


Home and Garden Bulletin No. 98

















CONTENTS;


W hy a plan?.............................................. .....................
W hat spending plan?.......................................... ...... ............
Steps in making your plan........................... ........ .........
Set your goals...................... ..........................................
Estimate your income........................................................
Estimate your expenses........... .............................. ............
Set up a trial spending plan............................. ...............
Make your plan work............ ..................................................
Keep records.....................................................................
Evaluate your plan............................................. ...............


Page
3
4
6
6
6
7
8
12
12
13


Prepared by
Consumer and Food Economics Research Division
Agricultural Research Service


Issued August 1964
Slightly revised October 1967


Washington, D.C.


For sale by the Superintendent of Documents, U.S. Government Printing Office
Washington, D.C. 20402 Price 10 cents

























a guide to budgeting

for the young couple


If you are a young married couple
who want to make a good start in
managing your finances, this pub-
lication can be of help to you.
Here you'll find the basic steps
selling up and using a simple work-
able budget-one evolved from your
own experience, tailored to your in-
come and situation, and geared to
your individual goals.
Budgeting doesn't mean that you
will be pinching pennies and neatly
recording how you spent every one,
but it does mean that you will-
Make money management a
joint venture from the start.
Face money matters frankly and
get problems down on paper.


* Consider each other's wishes.
* Agree on a realistic spending
plan.
Stick to budgeting until your
plan works.
Adjust the plan as your circum-
stances change.
WHY A PLAN?
Newlyweds are often more roman-
tic than factual about what it actu-
ally costs to run a household. Your
views on what you can afford may
be a little unrealistic at first. Per-
haps you have been living on an
income of your own and did not have
to share, or you have been in school
and dependent on your parents.


\A





















Now you find yourselves in an
entirely new situation-with new
responsibilities. You may be living
in a new community, too.
You'd like to establish the right
pattern of money management in
your marriage, but you hardly know
where to begin. You know it's
smart to live within your income and,
with time, get ahead a little.
If you look about you, you'll notice
some young couples seem to have
the knack of making ends meet,
while others, in the same circum-
stances, are already carrying heavy
debt loads and are often pinched for
money. The difference is that some
couples are better managers of their
resources-they have learned the
value of planning.
There's no doubt about it-making
and carrying out a spending plan
does help. To make a plan, you
have to sit down together, talk realis-
tically about money, face facts, and
work out any differences you may
have about how your income is to
be used.
If one of you wants to proceed
with caution-save ahead for the
things you want to buy-and the


other prefers to "live it up" and pay
later, you'll need to discuss the pros
and cons of both methods and decide
on a course of action both of you can
accept. Some compromise may be
necessary on both sides. This is all
to the good. It is when couples fail
to communicate with each other
about money problems and do not
work together as a team in solving
them that financial tiffs arise.
If both of you take part in making a
spending plan, you will feel better
about it and work harder to make it a
success. You will be less tempted
to buy unnecessary and trivial items
because you know what you want
your dollars to do for you.


WHAT SPENDING PLAN?
No readymade spending plan fits
every couple-or even one couple
necessarily. A set percentage of
income cannot be assigned rigidly
for each budget category. The old
iron-clad budgets used these meth-
ods, and failed. Why? Because
they did not allow for individual dif-





ferences or provide any flexibility
within the structure.
Each couple has different stand-
ards, values, needs, wants, and re-
sources. No two spending plans
can be alike because no two couples
or situations are alike.
What you need is a practical
spending plan that fits you-both
of you. No "his" and "her" ar-
rangieent here, please, even if there
is a double income. This is sup-
posed to be a money partnership.


Since this is the first "married"
budget, it will help to have some idea
of the relationship of the various
items of expenditure to each other-
that is, which are likely to take a
large part of the total, and which a
smaller part.
Here are some estimates based on
studies of spending by two-person
families. These figures show how
couples at two income levels (one
under, the other over, $5,000) di-
vided their income.


Lower Hligher
income income


Total money income................................................
Total for current living.........................................
Food and beverage ...........................................
Shelter (rent or interest on mortgage, upkeep, insur-
ance, and taxes)..........................................
Fuel and utilities.............................................
Household operation.............................. ......
Furnishings and equipment.................................
C lothing.........................................................
S Transportation.................................................
M medical care...................................................
Recreation and education...................................
Personal and miscellaneous................................
Gifts and contributions...........................................
Personal insurance.................................................
Income taxes....................................................
Savings (net changes in assets and liabilities)............


Percent
100
83
19

13
4
5
5
8
15
5
5
4
3
4
10
0


Percent
100
80
18

12
4
5
4
7
16
5
5
4
3
4
12
1


These estimates show that a bud-
get based on a single set of percent-
ages would not fit both income
groups. Moreover, it would not fit
all young couples in either income
group because individual couples
have different needs and desires.
For example, if you are a couple


who enjoy entertaining at home and
want space, serving equipment for a
large number of friends, and a gener-
ous budget for food, then your par-
ticular plan might allow a consider-
able portion of your income for these
budget groups and less for other
items.





If you are "car conscious," need
a late-model car in your line of work,
or like to travel, you may choose to
provide a larger transportation al-
lowance and pay less for rent. Per-
haps you are entering marriage well
supplied with clothes. If this is the
case, your first-year budget might
allocate a small sum for clothes in
order to have more for household
furnishings.


STEPS IN MAKING YOUR
PLAN

Set Your Goals

Before you actually make a spend-
ing plan, it is a good idea for the two
of you to set some goals -some for
right now (this month), some for
later (6 months or a year), and some


for the foreseeable future- perhaps 5
or 10 years from now.
Try to be down-to-earth and co-
operative about your goals. Sure
you both adore original paintings,
but now is hardly the time to hang
one on every wall, is it? If you find
that your goals are moving in oppo-
site directions-one of you dreaming
about a sleek convertible and the
other set on paying off a school
debt-better bring these aspirations
out in the open.
The more specific you are about
your immediate and long-time goals,
the better. One goal for the first
year or any year is, of course, to
live comfortably. Other first-year
goals might be: Meet the costs for
a final year in college .start sav-
ing for a better car .buy a chest
of drawers. A 5-year goal might be
to accumulate a downpayment on a
house of your own or to begin a
family.
Ready? Now list your goals in
the spaces below.
Goals for this month:


Goals for this year:


Goals for future years:


Estimate Your Income
The next step in making a spend-
ing plan is to add up how much
money will be coming in during the
period of your plan. The planning
period may be a month, a year, or
any length of time you choose.






A year is often the period used, but
if this is your first plan, you may want
to set up a trial plan for a shorter
period to see how it works out.
Write down any money you expect
to receive. Include wages or sal-
ary from your regular job, net
money earned from a farm or a busi-
ness you operate, interest from a
savings account or dividends from
stock you may have accumulated
before you married, a money gift or
loan you expect to get from the
family, and any extra income you
plan to earn from a second job or
from overtime on your present job.
If your income is irregular, as it
may be if you are a farmer, have
your own business, or sell on com-
mission, it may be wise to estimate
the largest and the smallest amounts
of income likely to be available and
to use the lower amount for your
spending plan. If income is very
irregular, you may want to make an
estimate for each month or week for
the budget period.
To figure out what your income
will be, use this form:





Estimated Money Income
(period)


Item


Wage or salary of-
Husband.......................
W ife.................................
Net profit from business, farm,
or profession.................
Interest, dividends..................
Other...............................
Total money income......


Amount



$





$


Estimate Your Expenses

Now you are ready to estimate your
expenses. One way to get an idea
of what it costs to live is to call upon
the experience of some of your
friends who have been married for
a year or two, but who are about
your age and are in approximately
the same income bracket. Even if
they give you only a rough idea of
costs it will be a start. Dad and
Mother might have some pretty
sound ideas, too.
But the best way to find out what
you will need to allow for each of
the budget categories is to keep a
record of what the two of you actually
spend for a month or two. Each can
carry a little pocket notebook in





which to jot down expenditures dur-
ing a week or pay period. Then total
the amounts at a budgeting session.
Or you may prefer to keep an ac-
count book in a convenient place at
home and both of you make entries
in it.
You can use the form on page 15
to help you keep a record of your
spending.
Keep the record faithfully for a
month or two to find out what you
are now spending for the various
budget groups, such as food, housing,
utilities, household operation, cloth-
ing, transportation, entertainment,
and personal items. Then you will
have a fairly accurate guideline for
estimating your expenses in your
plan for future spending.


Set Up a Trial Spending
Plan

Now you are ready to work out
your first spending plan, based on
your income, expenses, and goals.
A sample of the form you might use
is shown on page 9.


Enter fixed expenses

Every family has some expenses
that are more or less fixed-expenses
that have to be paid in specific
amounts at specific times. It is a
good idea to enter these fixed ex-
penses in your plan for future spend-
ing first, so you can see how much
they are going to amount to before
you begin to allocate the rest of
your income.
Start your plan by putting down the
fixed expenses you expect to have


every month. These will include
rent or mortgage payment on your
home, telephone and other utility
bills, and payments on installment
debts, if you have them.
Next enter the expenses that will
come up only once or twice a year,
such as real estate, personal prop-
erty, and income taxes; car license
fees and car insurance premiums;
life insurance premiums and vaca-
tions. It is wise to put aside a def-
inite amount each month toward
these large, irregular expenses to
spread the cost and have money to
meet them when due.
At this point you may want to de-
cide what you can set aside as sav-
ings and enter this as a fixed obliga-
tion, too.
You would like to get into the habit
of saving as soon as possible. Sav-
ing together can be almost as much
fun as spending together, once you
accept the idea that saving money
is not punishment, but a systematic,






Our Plan for Spending


Insurance


Debt payments

Savings for:
Emergency fund


Flexible expenses:
Food and beverages


Clothing


Personal


Transportation


Medical care


Total


19






planned way of reaching goals and
ambitions. You do without little
things now in anticipation of buying
what will give you greater satis-
faction later.
You will find it easier to save for
a purpose or toward a goal. A
goal for saving might be to ac-
cumulate enough to buy furniture.
Decide about how large a sum you
will need for this, and start saving
each month toward it.
If you possibly can do so, start to
build up an emergency fund. There
are bound to be extras that come up
at the most unexpected times-like
the car battery that has to be re-
placed the last day of the month, or
the unannounced guests who arrive
when the grocery budget is at low
ebb.
Perhaps you will feel that you
must have furniture, a car, or some
other costly item before you can
possibly save enough to pay for it.
You may prefer to buy it on the in-
stallment plan and pay for it as you
use it. Enter these monthly pay-
ments in your plan as fixed expenses.


Enter flexible expenses

After you have entered your fixed
expenses and your savings, you are
ready to consider your flexible ex-
penses. Flexible expenses are those
that fluctuate from week to week or
month to month.
Estimate how much you plan to
spend for food and beverages, cloth-
ing, transportation, and other budget
groups for the period you have de-
cided to budget for. To estimate
these expenses, go back over the
records you kept (if you kept a rec-


ord for a month or two) and see what
you spent for each of the budget
groups and decide if you want to con-
tinue this pattern. You may decide
you need to spend more on some,
and less on others.
While these records will be a big
help in estimating expenses for the
budget period, they won't be a com-
plete guide. You will probably
have some expenses coming up that
didn't occur while you were keeping
the record. A record kept in July
and August, for example, might not
include such big expenses as winter
coats and suits or fuel for winter
heating.
At this point you try to fit in the
things you have listed in your im-
mediate goals.
Remember to include a personal
allowance for each of you. A little
not to be accounted for spending
gives a sense of freedom.

Compare income, expenses

Now you are ready for the balanc-
ing act-to compare your total
expected income with the total of
your planned expenses for the period
you have planned for.
If your income covers your ex-
penses, and you are satisfied with
the results-fine. If your expenses
add up to more than your income,
you'll need to look at all parts of
the plan. Where can you cut down?
Where are you overspending? You
may have to decide what things are
most important to you, which ones
can wait.
Every young couple needs ade-
quate food, safe and decent housing,
and clothes that give a sense of
well-being. But you can be well fed



















(4


on hamburger or on porterhouse
steak. If you prefer to eat less
expensive but equally nutritious
food in order to afford better clothes
or to live in a more desirable neigh-
borhood-that is your choice to
make.
The solution to money problems is
not necessarily more money. Some-
times it is an understanding of how
to get more for the money you have,
plus the patience, energy and self-
discipline to do it.
It is quite possible that you can
do some trimming on your flexible
expenses. Once you get in the spirit
and put your mind to it-this learn-
ing how to cut down can be quite a
game-and may give you more true
satisfaction in the long run than
spending in a haphazard, happy-go-
lucky fashion and regretting it later.


Look over your flexible expenses.
To reduce them you might-
Eliminate some items alto-
gether, for the time being at least.
Spend less for certain items
(cut down on cigarettes or pay less
for a spring coat).
Make use of your own skills
instead of paying for services (make
the cafe curtains you want instead
of buying them, wash your car, etc.).
Take your lunch from home
instead of buying it.
Take advantage of free com-
munity services for education and
recreation (concerts, parks, libraries,
lectures, recreational centers, art
exhibits).
Sometimes the need (or was it
really a desire?) for something big
diminishes with time and some less
expensive and more obtainable goal
can be substituted.
If you have pared your flexible
expenses as far as you think you
can, scan your fixed expenses.






Maybe you can make some sizable
reductions here. Rent is a big item
in a budget. Perhaps you should
consider moving to a lower-priced
apartment or making different liv-
ing arrangements. Perhaps it would
be better to turn in a too-expensive
car and get a cheaper one to use
until you get caught up.
If, after doing all the cutting you
think you can or are willing to do,
your plan still calls for more than
you make or can reasonably expect
to pay for in the future, you may
want to consider ways of increasing
your income.
If both of you are working, you
might start looking about for better-
paying jobs. In extreme cases, a
part-time second job may be the
answer. If either of you is not
working now, you might consider
be-ciiming a dual-income family, or
you might be able to make some
hobby or talent pay off.
Another possibility is to draw on
reserves you may have. These are
decisions only the two of you can
make.



MAKE YOUR PLAN WORK


After your plan is completed,
put it to work. This is when the
fun really starts! How firm will
you be under the salesman's spell?
Can you resist impulse spending?
If you are really interested in
sound money management and want
to form good buying habits, you
will find a sufficient supply of con-
sumer information available for
your study.
Here are some general guidelines


that may help you get the most for
your money:
Take advantage of weekend
food specials.
Inform yourself on a product
before you shop for it.
Get over the idea that every-
thing you buy has to be brand new.
Secondhand furniture, for example,
may be a good investment for young
couples, especially if you are not
permanently settled and are likely
to move about considerably in the
years ahead.
Be alert to quality. Compare
prices.
Patronize seasonal sales at
reliable shops. So-called "white
sales" offer towels, sheets, and
other household textiles at substan-
tial savings.
Be knowledgeable in the use
of credit. Know what it costs. The
table on page 13 shows interest rates
for commonly used sources of con-
sumer credit.


Keep Records
You will find it helpful to keep
track of expenses, at least in the
beginning, to find out how your plan
works. A spindle for receipts and
other notations of amounts spent,
kept in a handy place, and a record-
ing and adding-up session at the end
of the week or month may be all the
recordkeeping you need to do.
Or you might like to use a form
similar to the partial one shown on
page 15 to record your expenses.
This form may be easily ruled off
on a sheet of paper or in a looseleaf
notebook. Allow a separate column
for each category of expense you
want to keep track of.






Installment Credit Rates


Financing agency or type of loan


A. Cash lenders:
Credit unions.............. .................. ....... ............
Commercial banks-personal loans..........................
Consumer finance companies-under small loan laws...
Illegal lenders........................................ ...........
B. Retail installment financing in 24 States with rate legisla-
tion- 12-month contract:
New cars................................. ... .. ..........
Used cars under 2 years old....................... .....
Used cars over 2 years old.................................
C. Retail installment financing in States without rate legisla-
tion- 12-month contract:
New cars.................................. ....... .................
Used cars..................................... .... ...


Rates paid by consumer credit
users (equivalent percent per
year on unpaid balance)


Common
rate


I I


Percent

12
12
30


Range of legal
maximum rates


Percent


12
12 to 42
24 to 48
'42 to 1,200


12 to 24
18 to 31
18 to 43


S12 to 120
'19 to 275


'No legal maximum here. Figures shown give the range of actual rates reportedly being charged.
2 Not available.
Source: Mors, W. P., Consumer Credit Facts For You. Western Reserve University, Bureau of Business Research. Edition
2. Cleveland, Ohio. 1959.


You will find it helpful if the
column headings conform in general
with the headings in your plan, so
you can check your expenses against
your plan. You can subdivide the
groups, though. For example, "Food
and Beverages" might be divided
into "Food at Home" and "Food
Away From Home" and expenses
noted separately. Or "Medical
Care" might be divided into medical
and dental care with separate col-
umns made for each. Or, if you are
still in college, you may wish to
keep track of your "Education"
expenses separate from "Recrea-
tion."
At the end of the month or period
under consideration, add up your


expenses under each heading so you
can compare them with your plan.
Keep records simple. The sim-
pler the records, the more likely
you are to keep them. Recordkeep-
ing need not be a continuous process.
Once you've set your spending pat-
tern, records -at least detailed
ones -may not be necessary.

Evaluate Your Plan

At the end of the budget period,
compare what you actually spent
with what you planned to spend.
If the amounts are the same, or
reasonably close, were you satisfied
with the results? If you spent
differently than you planned, why?
Was your plan unrealistic or too


























rigid? Did you buy something you
didn't plan for? Did you have an
unexpected change in income?
Did the plan fail because the two of
you didn't see eye to eye on some
phases of it? Did one or both of
you fall down in keeping records?
If your first plan didn't work in
all respects, you shouldn't be
discouraged.


A budget is not a "one shot deal" -
something you make once and never
touch again. Instead you keep re-
working a budget until it works for
you and the results satisfy you.
This means making, appraising, re-
vising and remaking until eventually
you may get to the point where it
actually isn't necessary to write
down all the facts and figures to
have a budget. The whole process
becomes sort of second nature to
you. All you need to do is carry a
plan in your head, if you prefer to
budget that way.


If you were perfectly satisfied
with your first try at budgeting,
you will still need to adjust your
plan from time to time. As circum-
stances change-a move to a dif-
ferent community, the arrival of a
baby, or a change in jobs with a
change in income-you will discover
you need to set new goals and to
reorganize your plan around your
new goals.







Record of Our Expenses


Classified as-


Food and shelter
beverages


1


Household i
operal ion


Date


Item (or
service)
bought


Gifts and
contributions

$


T it al




UNIVERSITY OF FLORIDA

111111111 1 ll i111111 BAII I ll 1111AII
3 1262 08856 1294









MORE INFORMATION
Listed below are publications prepared by the-U.S. Department of Agri-
culture that may be helpful to you in getting the most for your money. These
publications are available from the U.S. Department of Agriculture, Wash-
ington, D.C. 20250.
Order No.
Washing Machines .Selection and Use...................... G 32
Home Freezers Their Selection and Use.................... G 48
Home Care of Purchased Frozen Foods........................ G 69
Food for the Young Couple ................................... G 85
Conserving the Nutritive Values in Foods....................... G 90
Eggs in Family Meals: A Guide for Consumers ................. G 103
Vegetables in Family Meals: A Guide for Consumers............. G 105
What Young Farm Families Should Know About Credit......... F 2135
Know Your Butter Grades.................................... MB 12
Tips on Selecting Fruits and Vegetables........................ MB 13
U.S. Grades for Beef..................................... MB 15
Cheese Buying Guide for Consumers ........................... MB 17








This is a cO ME)t(g4 Sueof US DA


U.S. GOVERNMENT PRINTING OFFICE: 1967 0-275-560

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