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Financial Education: Money Matters

Money Matters

Money Matters

One of the first steps to financial security is planning and following through on a personal budget. Budgeting is about choices choosing how to make money and choosing how to spend money. This course will help you with some of the basics. When you have completed this course, you will have a better understanding of:

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Why Budget?

Why Budget Your Money?

Have you ever taken $20 out of the ATM and, at the end of the day, not known where it all went? It is critical you understand where your money goes. Knowing what your income and expenses are every month will help you take control of your financial situation.

Taking control of your financial situation helps you:

  • Reduce the anxiety of not knowing whether you have enough money to pay your bills when they are due; and
  • Gives you a sense of control over money, rather than letting money have control over you.

Budgeting will also help you build assets. Building assets improves the quality of life for you and your family.

A good place to start taking control of your financial situation is to develop a saving and spending plan. This is called a budget. A budget is a step-by-step plan for meeting expenses in a given period of time.

One way to understand where your money goes is to keep a daily spending diary to record everything you spend. You can use this information to track your spending over a period of time.

Income & Expenses

Income versus Expenses

As you complete the Income and Expenses Worksheet, you may want to consider the following income and expense sources:


  • Wages
  • Public assistance this might include Temporary Assistance to Needy Families, or TANF, and food stamps. (The TANF program might have different names in different states.)
  • Child Support
  • Alimony
  • Interest
  • Dividends
  • Social Security

Remember,gross income is your total income without deducations. Net income is gross income less Social Security and other taxes. Net income is the amount you actually take home, and what you will want to use on the Income and Expenses Worksheet.

Social Security is a potentially valuable insurance plan. On some pay stubs, this is called FICA, which stands for the Federal Insurance Contributions Act.

Social Security benefits include:

  • Retirement coverage benefits paid every month to eligible retired workers, as early as age 62.
  • Disability coverage benefits paid every month to eligible workers of all ages who have a severe disability.
  • Family coverage benefits paid every month to the spouses and children of eligible retired and disabled workers.
  • Survivors coverage benefits paid every month to the eligible widow or widower and children of a deceased worker.
  • Medicare benefits help with hospital bills, as well as limited coverage of skilled nursing facility stays, hospice care, and other medical services at age 65, or younger if you become disabled.

If you are 25 or older and not already receiving Social Security benefits, you will receive a Social Security statement just before your birthday every year. You can also call the phone number listed on the resources page to request a copy of your statement.

The statement is a record of your earnings you have paid to Social Security taxes during your working years. The statement provides estimates of the monthly disability, and survivors benefits you and your family could be eligible to receive.


Fixed Expenses are items you have little or no control over. You will pay a fixed amount for these expenses each month. Some fixed expenses may include your rent or mortgage, property taxes and insurance and trash collection.

Other fixed expenses you may have some control over before the initial agreement. They become fixed expenses after you have signed a contract. You should shop for the best value before committing to the payments. Examples include car payments, car insurance, loan payments, health insurance and child or elder care.

Finally, flexible expenses are items you can exercise some control over their amount. Think about your needs versus your wants and how you might control the cost of these expenses.

Remember, when completing the Income and Expenses Worksheet, you might need to plan for expenses you have to pay quarterly or annually.

If, after you complete your budget worksheet, you find that you have more expenses than income, there are ways to get out of trouble. Remember, everyone has different priorities. You will have to make decisions that are right for you.

Generally speaking, it is probably most important to pay off your necessary household expenses, such as rent or mortgage, utilities and food, first. You need to pay your rent or mortgage to ensure you don't get evicted or have your property foreclosed upon. Think about the health and safety of your family when making these types of decisions.

Many utilities, such as the telephone company, electric company and gas company, have programs to lower your bill if you qualify. If you think you may need assistance, contact your utility company.

If you can pay your monthly household expenses, but are having trouble paying all your loans, consider:

  • Paying off the loan with the highest interest rate first to save on interest payments.
  • Talking to your creditor. Your creditor may be willing to reduce your payments or change the terms to accommodate your situation. Some creditors might offer extensions, smaller payments over a longer period of time. Some creditors might accept partial payments.
  • Getting a debt consolidation loan. Be cautious of this option. If loan fees and interest rates are too high, it may not be the best option for you.
  • Getting professional advice. Reputable credit counselors can help you deal with financial problems. Some organizations charge little or nothing for their services.

Be cautious of companies that promise to fix your credit problems right away. Credit repair can be a long process that might take several years. Credit reports, bankruptcies, and credit counseling are covered in the To Your Credit course.

Decrease Spending

Tips to help you decrease the amount of money you spend:

  • Carry only small amounts of cash in your wallet so you won't spend it.
  • Use direct deposit. You will be less likely to spend money if it goes straight into your account.
  • Control your use of credit cards.
  • Don't go shopping just for fun.
  • Take your written savings goals with you as a reminder.
  • Buy only what you need; don't buy things just because they are on sale.
  • Use coupons to save money.
  • Use a grocery-shopping list to prevent impulse buying.
  • Take your lunch to work instead of eating out.
  • Shop around to get the best deal for big-ticket items like cars and appliances.
  • Pay your bills on time to avoid late fees, extra interest charges, utilities being turned off, eviction, repossessions, and the costs of a bad credit rating.

Increase Income

Tips to Increase Your Income

Earned Income Tax Credit
The EITC is a refundable federal income tax credit for people who work but do not earn high incomes. If you qualify, it reduces the amount of tax you owe, and it may give you a refund. You may even be eligible for an advance EITC, which allows you to receive part of the credit in each paycheck during the year.

The following eligibility requirements apply:

  • You must have a valid Social Security number.
  • You must be between 25 and 65 years of age.
  • You must have earned income. This does not include alimony, child support, welfare benefits, unemployment benefits, interest, dividends, pensions, and certain workforce payments.
  • Children must live with you for at least 6 months to claim additional benefits.

Benefits can range from $350 to $3,888. Rules and examples can be found in IRS Publication 596. A free copy of the application form and the IRS Publication is available at: www.irs.gov or by calling the IRS at 1-800-829-3676. You can also call the IRS directly at 1-800-829-1040 for assistance.

Any refund you receive as a result of taking the EITC will not be used to determine your eligibility for the following programs or how much you can receive from them:

  • Temporary Assistance for Needy Families (TANF)
  • Medicaid and supplemental security income (SSI)
  • Food stamps and housing assistance

Child Tax Credit

The Child Tax Credit can lower the amount of income tax you owe and increase any refund you might receive. The benefit can be as high as $500 per child. There are additional benefits for single working mothers. Information is available in IRS Publication 972. A copy of the tax credit application form and the IRS Publication is available at: www.irs.gov or by calling the IRS at 1-800-829-3676. You can also call the IRS directly at 1-800-829-1040 for assistance.

Eligibility requirements include the following:

  • The child must be 17 years of age or younger by the end of the tax year.
  • The child must be a U.S. Resident.

Credit for Child and Dependent Care Expenses

If you pay someone to care for your child under the age of 13, or other dependent who is not able to care for him or herself, you might be eligible for a tax credit. The tax credit can lower the amount of income tax you owe and increase any refund you might receive. To qualify, you must pay the child or dependent care expenses so you can work or look for work. Information is available in IRS Publication 503. A copy of the tax credit application form and the IRS Publication is available at: www.irs.gov or by calling the IRS at 1-800-829-3676. You can also call the IRS directly at 1-800-829-1040 for assistance.

Certified Public Accountants and other tax professionals may be available at local libraries and churches to provide free or low-cost help, during tax time, to determine if you qualify for these tax benefits. Remember, you are obligated to provide accurate information when applying for these benefits. Tax fraud is a serious offense.

Budgeting Tools

Budgeting Tools

To successfully use any budgeting tool, you must keep accurate records. Some tips to improve your record keeping include:

  • Keep records in a safe place in your home or in a safe deposit box.
  • Organize your files so it is easier for you to find information about your earnings and spending and to update important financial information.
  • Keep your tax records for at least 3 years.
  • Send in your bill payments 7-10 days before they are due to avoid late fees.

Below are several different types of budgeting tools you can use. Be sure to use the one you are most comfortable with. You can also try the Monthly Payment Schedule Worksheet or the Monthly Payment Calendar.

Expense Envelope System

  • This tool is useful if you pay your bills with cash each month.
  • Make an envelope for each expense category (rent, utilities, food, etc.).
  • Label the envelope with the purpose, amount and date due.
  • When you receive income, divide it into amounts to cover the expenses listed on the envelopes.
  • Pay bills right away, so you won't be tempted to spend the money for something else.

Budget Box System

  • The budget box is a small box with dividers for each day of the month, like a filing system.
  • When you receive a bill, check the due date and place it behind the card that represents the due date.
  • As you receive income, pay all the bills that are due.

Computer System

  • If you have access to personal computers, you can create your own spreadsheet. You may also want to purchase a personal finance program. They are available for less than $75. Using a computer to manage your finances is relatively easy. Once you set up the system, updating information is quick and easy. It is important to enter transactions frequently to truly understand your financial position.


Budget Resources

Federal Deposit Insurance Corporation (FDIC)
Division of Compliance and Consumer Affairs
550 17th Street, NW
Washington, DC 20429
1-877-ASK-FDIC (1-877-275-3342)
Email: consumer@fdic.gov
Web site: www.fdic.gov

Internal Revenue Service (IRS)
1-800-829-3676 (Publications and Forms)
1-800-829-1040 (Assistance)
Web site: www.irs.gov

Social Security Administration (SSA)
Web site: www.ssa.gov

National Foundation for Credit Counseling (NFCC)
Web Site: www.nfcc.org
NFCC is a national non-profit organization that assists consumers in dealing with their credit problems.