Copyright Goodheart-Willcox Co., Inc. 36 Chapter 2 Personal Financial Planning Estimate your income for the budget period. Using a worksheet similar to the one in Figure 2-2, estimate how much money you normally receive from each source of income. Each amount will be recorded in the Income section of the worksheet in the Estimated column. If you are using a spreadsheet, enter a formula to sum the sections. If you are using a handwritten budget, use a calculator to total the amounts. Step 3: Estimate and Total Your Expenses After calculating income, estimate typical expenses per budget period. An expense is the cost of goods and services purchased. Generally, expenses will be either fixed or variable. A fixed expense is a set amount that must be paid each budget period. These expenses may include items such as rent or mortgage payments, tuition, insurance premiums, or loan payments. Fixed expenses tend to increase in number and amount as you move into adult life. As a rule, fixed expenses must be paid when due. Therefore, it is important to list them first. A variable expense is a cost that changes both in the amount and time it must be paid. Variable expenses include items such as food, clothing, and entertainment. These expenses may be necessary or discretionary. A discretionary expense is an amount spent for an item that a person could do without. For example, food is a necessary item. However, the cost of a dinner in an upscale restaurant is a discretionary expense. When you are short of cash, discretionary expenses offer the best opportunities for adjusting your spending. At this point in your life, you may receive basic necessities from your family or guardians and spend your money mainly on discretionary items, such as music, cell phone data, computer games, and movies. For adults, discretionary expenses often include vacations, gifts, expensive clothing, and other unnecessary goods and services. Using the worksheet in Figure 2-2 as a guide, list each estimated fixed and variable expense in the Expenses section. Then enter the amount you spend on each one and total the sections. You may want to star discretionary items and start with them if you need to reduce your expenses. Batteries are composed of hazardous materials that will harm the environment if they are disposed of in a landfill. Batteries should always be properly recycled by a reputable organization and never thrown in the regular trash. To be environmentally savvy and save money, consider using rechargeable batteries. Rechargeable batteries, like those in cell phones, can be used many times and will save you trips to the store to purchase disposable ones. Green Rechargeable Batteries