Fixed  expenses  include  rent  and  mortgage payments and time payments for expenses such as autos, furniture, and insurance. The difference between   fixed   expenses   and   net   income   is discretionary  income.  This  is  the  income  available for  planning  purposes,  which  personnel  can  apply to variable or flexible expenses. These expenses include  items  such  as  savings,  food,  entertain- ment,  clothes,  and  gifts. When  preparing  a  budget,  personnel  first  need to consider savings. Planning first for savings is important. When personnel plan to pay expenses first,  they  usually  find  they  have  no  money  left for  savings. Everyone  needs  a  savings  program  for  unfore- seen expenses in the future. In addition, using a systematic,  planned  savings  program  will  help personnel achieve set goals. In helping your people determine  how  much  to  save,  recommend  they save a realistic percentage of their discretionary income. This percentage could be as little as 5 to 10  percent  or  as  high  as  20  percent  of  the discretionary   income. After savings comes fixed expenses, followed by  variable  expenses.  The  U.S.  Department  of Labor  suggests  these  percentages  of  take-home pay  for  budget  preparation: FIXED  EXPENSES VARIABLE  EXPENSES Housing 25% Food 23% Transportation 9% Clothing 11% Gifts  and contributions 5 % Miscellaneous 5% Savings  and unforeseen expenses 22% These percentages are approximate and will vary  from  area  to  area  and  person  to  person. To  prepare  a  personal  budget,  personnel should  keep  close  track  of  their  income,  expenses, and savings for several months. This information will help them understand their spending habits. It will also help them determine average nonfix- ed  expenses.  Understanding  their  spending  habits puts  personnel  in  a  position  not  only  to  budget their   income,   but   also   to   correct   undesirable spending habits. Plans for spending extend to many areas and vary  according  to  the  person’s  status  and  require- ments. The basics of spending are to spend money wisely and in as small amounts as possible. Use of Credit Credit   has   its   base   largely   on   trust.   The average  person  in  the  Navy  is  trustworthy  and expects  to  receive  a  fair  deal  in  business  and financial  dealings.  Conversely,  the  way  personnel handle  their  private  financial  affairs  provides  a reliable  sign  of  their  general  character  and trustworthiness. When we speak of credit, we usually think of time   payment   purchases   or   charge   accounts. Actually credit consists of a much broader scope. The  entire  country  runs  on  credit,  including industries;  banks;  and  local,  state,  and  federal governments.  In  fact,  if  credit  were  to  stop suddenly,  the  result  would  be  catastrophic.  For example,  almost  no  one  would  be  able  to  buy  a home,  an  automobile,  furniture,  or  a  television or stereo set. Without these sales, unemployment would skyrocket. These salaries, not available for the retail market, would in turn adversely affect the sale of other goods. The effect would continue from  the  highest  to  the  lowest  level,  and  economic chaos  would  result. USE   OF   CREDIT   BY   NAVY   PERSON- NEL.  —The  Navy  expects  all  its  members  to discharge their financial responsibilities in a timely manner. The Navy expects its members to strive to  avoid  any  discredit  upon  themselves  or  the naval  service.  A  good  knowledge  of  credit  will allow  them  to  better  handle  their  financial  affairs and  often  save  money. Navy  personnel  have  special  problems  not faced by the public in borrowing money. If Navy personnel are to use credit wisely, they need to know  the  ABCs  of  credit.  They  especially  need to  know  how  to  avoid  some  of  the  problems young  Navy  men  and  women  often  have. PRINCIPLES OF CREDIT. —Credit  literally means  buy  now,  pay  later.  The  system  permits  us to purchase goods as we need them, but pay for them  over  a  certain  period.  Credit  means  you receive  a  loan  of  money,  and  you  always  pay extra when you borrow money. Credit, if you use it  wisely,  ensures  a  reasonable  standard  of  living. However, you cannot substitute credit for sound financial  planning  and  a  systematic  savings  plan. Additionally,  improper  use  of  credit  can  create a  financial  nightmare  that  can  adversely  affect your  job,  family  life,  and  mental  and  physical health. 4-14