Financial Literacy and Budgeting

Learn to Make Your Money Go Farther 

Financial literacy is a set of skills and knowledge that allows you to make informed decisions about managing your money and financial resources. It involves understanding earning, budgeting, loans, borrowing, planned spending, and investments. 

“Great, but what does that actually mean?” 

Increasing your financial literacy will enable you to make informed, beneficial financial decisions and manage your money more effectively. That leads to greater savings, lower debt, and to reaching your financial goals.  

Principles for Successful Financial Planning

  • Take an honest look at how much you earn and where your money goes. 
  • Plan to put what you earn toward the things that matter most to you, while making sure you can afford the essentials, like rent/mortgage, car payments, insurance, and so on. 

  • Think beyond your next paycheck. Save for future wants and needs. 
  • Set money aside for unexpected costs and emergencies. 

  • Spend money wisely and consciously, keeping your budget in mind. 
  • Select investments that are beneficial to your financial growth and security.

  • Understand the terms fully before borrowing money.  
  • Have a plan in place to pay off any debt—and stick to it! 
  • Set a deadline for yourself to have your debt paid off, and allocate money each month toward repayment. 

  • Earn and save money to build a solid financial foundation. 
  • Prioritize security and avoid identity theft and fraud. 

Budgeting and Planning: Thinking Ahead is Key

Budgeting is a proactive approach to organizing your finances. A budget tracks what you earn and what you spend and ensures you have more money coming in than you have going out. This allows you to cover the costs of living, to afford the things that are important to you, and to plan toward short- and long-term goals. 

You can use this Make a Budget worksheet, published by the Federal Trade Commission, to help guide you. 

What do you want your money to do for you? Set realistic financial goals for what you’d like to achieve; keeping these goals in mind will help guide you in getting the most out of your money. Think about what counts as a need and as a want for you.  

Determine your income by reviewing your paystubs and see how much you’re earning each biweekly or monthly period.  

Be sure to consider if your pay varies from one pay period to the next, for example if your pay includes commissions or tips, or if your hours may vary from week to week. How much can you reliably expect to have coming in? 

When in doubt, budget conservatively; it’s better to have a little extra, that you hadn’t counted on, than to come up short! 

Know the Difference: Gross Pay vs. Net Pay 

Gross pay is the total amount of money you earn before any deductions are taken out. Your gross pay equals your hourly pay rate, multiplied by the number of hours you work in a given period of time. 

Net pay, also called take-home pay, is the amount of money you receive after all deductions are taken out. 

There are numerous deductions that are applied to your gross pay. These usually include federal income tax, Social Security, and Medicare, and may also include things like premiums for health insurance, retirement contributions, or state income tax. 


Track where your money goes on a weekly or biweekly basis. How much are you spending, on what, and how often? Opening a checking and/or savings account can make this much easier. 

Fixed or Flexible: Which Is It? 

Fixed spending consists of costs that occur regularly (once a week/month/year/et cetera). The amounts usually don’t change much from one to the next. 

Examples: rent/mortgage; cell phone bills; streaming subscriptions; auto/renter’s/homeowner’s insurance; car payments; utilities; childcare; loan payments 

Flexible spending, on the other hand, may change regularly and can be directly influenced by the choices you make on a day-to-day basis. 

Examples: groceries; gasoline; eating out; home repairs; clothing; entertainment; personal care 

Your budget should prioritize your needs first and your wants second. Expenses should be less than or equal to your total income, that is, your net pay. 

If your income isn’t enough to cover all your expenses, adjust your spending by deciding which expenses you can reduce. 

Borrowing, Debt, and Repayment

Most of us are familiar with the concept of borrowing money: You want to pay for something, but you don’t currently have the money to afford it, so you ask someone to let you borrow money. They provide you with the money so that you can afford it, with an agreement to pay it back in the future. 

Borrowing lets people afford things they wouldn’t otherwise be able to, by providing them with the money they need upfront and offering the option to pay for it over time. This applies to things like car loans, credit cards, mortgages, and student loans. 

Financial Aid Starts With FAFSA

The Free Application for Federal Student Aid (FAFSA) is a form completed by college students that determines eligibility for financial aid, and needs to be submitted for each academic year.  

The FAFSA is about more than just federal loans; it also determines eligibility for federal grants, and submitting your FAFSA is often a key step in applying for scholarships! 

Go to to get started. 

Submitting the FAFSA does not affect your credit score, and having bad credit will not affect your eligibility for federal aid! 

Debt: Not a Four-Letter Word

The word debt often has negative connotations, but debt isn’t (inherently) bad; it’s just misunderstood. Debt simply means owing someone money, with an agreement to pay the amount that’s owed. Consider this: When you work, your employer is in debt to you until they pay you the wages you’ve earned. Debt isn’t the problem—runaway debt is. 

You can avoid the stress of runaway debt by being smart about how you borrow and repay money you owe. 

How to Be a Smart Borrower

Check for scholarships and grants that you are eligible for prior to accepting loans. Use CSM’s Scholarship Finder to match with and apply for grants and scholarships with a single application. (Be sure you’ve submitted your FAFSA!) 

Know what you’re agreeing to before you accept a loan. What’s the interest rate? Do you need to accept the entire loan or can you accept a portion? Does interest accrue while you’re enrolled in school? When do you have to start repaying it? Understand which repayment plan applies to you. 

Know your loan balance, and include monthly loan repayment in your budget. Pay your loan early and often. Prioritize paying down high-interest loans. If you find unnecessary spending in your budget, try cutting that and have that money go towards early repayment.

The Consumer Financial Protection Bureau, part of the Federal Trade Commission, regulates financial aid lenders, educates student borrowers, and protects against predatory lending and collection practices.

Understanding Credit and Credit Scores

When a lender agrees to let someone borrow money, the lender is taking a risk that the borrow might not pay them back. Lenders base their decisions to lend or not to lend on a borrower’s credit and credit score. Credit can be thought of as your reputation with banks and other lenders. Your credit score is a snapshot of your credit risk at a given point in time, that a lender takes when you apply to borrow money. 

Your credit score consists of things like your payment history, showing that you pay your bills on time; the amount of debt you currently have; the length of your credit history; and good standing with a variety of accounts. 

With credit scores, higher is better! Having better credit tells lenders that you’re less of a risk, which can make them willing to offer you better interest rates, higher credit limits, and other perks. 

Submitting the Free Application for Federal Student Aid (FAFSA) does not affect your credit score, and having bad credit will not affect your eligibility for federal aid!

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