- BUDGETING -

1. - BUDGETING - “Most people don’t plan to fail. They simply fail to plan.” After your test correction do “Test your $$ sense”

2. BE PREPARED How do you build a house? How would you go on a trip? Map it out Gather resources Consider options Take action • Floor plan • Gather resources • Consider options • Take action How do you manage $$$? When you operate without a personal budget, you are spending your money without a guideline or plan.

3. Spending PlanBUDGET A plan for tracking and managing your income and expenses “A Rich man knows exactly how much $ he makes and where it is going. A poor man has no idea!”

4. Why a spending plan? • Gives a person an understanding of where their money is going. • Tracks income and expenses • Helps meet your financial goals • Helps live within your income • Reduces the need for using credit cards and going into debt.

5. 2 parts to a Plan • Income • Money earned • Job, savings, parents, interest, gifts • Gross and Net • Expense • Money spent • Fixed and Variable / flexible

6. Budget Buster (off to side) • Give yourself 5 points if you have a budget. • Give yourself 5points if you have a checkbook or a debit card. • Deduct 3 points if you have ever bounced a check or gone over on your card. • Deduct 2 points if you bought something this week without comparison shopping. • Give yourself 2 points if you bought a store brand, rather than a name brand item this week. • Give yourself 3points if you have a savings account. • Give yourself 5points if you added any money to your savings account this week. • Give yourself 3 points if you bring a lunch from home or eat school lunch. • Deduct 3 points if you go out for lunch more than 2 times a week. • Deduct 5 points if you routinely carry more than $10.00 in your purse or wallet. • Give yourself 5points if you have a method of recording what you spend. • Total your points. The winner is the person with the most points.

7. Gross Income • The total amount of income earned before deductions are made. • You must earn $15.00 to buy a $10.00 item.

8. Net Income • The amount of income left after deductions are taken out. • Now you get to spend! • How do your values influence your spending habits?

9. Income • Gumball machine represents components of the financial planning process • Incomeis money earned • Gumballs going into the machine • Wages from a job, allowance, gifts

10. Expenses - money spent *= Fixed Variable Expenses which vary from week to week or month to month (clothing, food, entertainment…) • Expenses which usually do not vary in amount and must be paid on a regular basis (mortgage, car payment, insurance…)

11. Expenses • Expense is money spent • Money going out of the gumball machine • Fixed expensesmay have a fixed amount due each month and are contractual • Flexible expensescan vary each month in the amount owed and are not contractual

12. Spending plan activity Decide if each item is income, a fixed expense, or a flexible expense

13. Spending plan activity Rent Fixed expense Wages Income

14. Spending plan activity Groceries Flexible expense Internet bill Fixed expense

15. Spending plan activity Tips Income Utilities Fixed expense

16. Spending plan activity Gift from family Income Savings Fixed expense

17. Spending plan activity Automobile registration Fixed expense Eating out/Snacks Flexible expense

18. Spending plan activity Scholarships Income Hobbies Flexible expense

19. YOUR MONEY NET LOSS NET GAIN When a person has more income than expenses. Remaining income can be allocated into savings, investing, or spent. • When a person has more expenses than income during the time period of the spending plan. • If this occurs, either increase the income or decrease the expenses. Take 20 Beans

20. STAND UP:For the rest of your life you cannot spend money on…. (sit down if you cannot go with out spending money) Going out to eat more than 3 times a month Expensive Vacations Name brand clothes, shoes, accessories Data plan Cell phones Cable Channels Internet • Opening day for movies • Manicure/pedicure • Athletics/gym memberships • Hairstyles that have expensive treatments (color, perms, etc.)

21. Identify your Needs vs wants when figuring out how to spend you money. • NEEDS Essentials…the basics of life • WANTS • Simply increases the quality of living

22. You just got a surprise gift $100!What will you do with it? 1. Spend it right away for something I want—“A shirt in that new shade of blue will look great on me!” • Spend it right away for something I need— “My running shoes are falling apart. Now I can get a new pair to break in before track season starts!” • Use it to get more money out of Mom or Dad—“That MP3 player I’ve been wanting is $200. I wonder if Mom or Dad will give me the extra $100?” • Spend some/save some—“College is in my future, so I want to be sure to have some money to get me started. But it also is important to have a little fun, like taking in a movie and having dinner with my friend.” • Help someone out— “Our rent went up $50 a month. Mom doesn’t know how she’s going to pay for it. This money could help her out for a couple of months.” 6. Save it all— “A penny saved is a penny earned. If I put this into my bank account it will earn interest and I’ll have money when I really need it. My car insurance is due in a few weeks.”

23. What do you value?-Money Personality • Spend it right away for something I want (you want a lot of stuff and you want it now) • Spend it right away for something I need (money is unimportant, but it helps you get the things you want and need) • Use it to get more money out of Mom or Dad (you use money to make you feel important) • Spend some/save some (you are not concerned with money, no reason to worry about it) • Help someone out (you are not concerned with money, no reason to worry about it) 6. Save it all (you value money for the security it gives you)

24. Group Juggle • How Do You Balance it all?

25. SPENDING PLAN PROCESS 1. Set Financial SMART Goals • Specific • Meaurable • Attainable • Realistic • Time bound • To save $5,000 for a car down payment, I will deposit $208 into savings each paycheck for 2 years.

26. Step 2- Get organized • Determine the appropriate record keeping format to use. • Notebook, keep receipts, debit card tracking, cell phone or computer program,… • Select categories of spending. • Select time period for income and expenses.

27. Spending Plan 3. Decide on your Plan Creating a Budget Video

28. Make A Budget / Plan 1.Track your spending to find out where your money is going. 2.List and add up all of your monthly expenses ($612.00) 3. Add up your monthly income ($750.00) 4. Balance your monthly expenses to match your monthly income. • Is it a Net Loss or a Net Gain? • Rework the expense amounts until these 2 areas balance. • This is your budget. ($138.00 left)

29. POSSIBLE BUDGET ITEMS hobbies Holidays/birthdays/gifts home interior/exterior (yard) * house payment or rent household supplies (cleaners, paper products) insurance * medical bills * medication natural gas pet care phone savings schooling vacation *auto—fuel and maintenance or transportation cable TV car payment clothing clubs or organization fees cosmetics *credit card or loan payments Donations eating out *electricity entertainment *food Hair cuts

30. The Costs Add up • Daily Latté • $3.75 each time • $1,365 per year • Eating lunch out 5 days per week • $5-$10 each time • $1,300-$2,600 per year • Daily sport drink • $2.00 each daily • $728 per year • Monthly haircut • $35.00 per month • $420 per year • Weekly date night at the movies with popcorn • $30 per week • $1,560 BUDGET JAR

31. Budgeting % allowance for each month Study Guide Figures

32. How does the typical family spend their pay check? Remember living expenses vary depending on where you live, age, and personal goals. $2500 net pay check $600 (30%) Housing $440 (22%) Food $200 (10%) Clothing $40 (2%) Personal $180 ( 9%) Other $140 (7%) Recreation $160 (8%) Insurance $280 (14%) Transportation $280 (14%) Utilities, home repairs

33. 4. Implement • Track the money that you spend throughout the month both variable and fixed. Update your budget as expenses change.

34. Spending Plan Template

35. Vanessa’s Budget • Vanessa's monthly student worker paycheck earnings after taxes is $412. She also has a part-time waitress job on the weekends and earns $168 per month after taxes.  Her parents supplement her earnings with $200 a month. She adds that to her monthly paycheck earnings to get a total monthly income of $780. • Next, Vanessa adds up her fixed expenses: rent (she shares an apartment with two others and pays 1/3 of the rent) $200, and she is responsible for her car insurance which is $128 per month.  She has a car that her parents have given her, so she does not have a car loan. She is very lucky that her parents pay her tuition and fees for school each semester.  She is also on her parent’s health insurance and that takes care of any doctor visits when she gets sick as well as visits to the dentist.

36. Now Vanessa adds up her variable expenses. Her share of utilities is usually $100 per month and that includes cable.  She spends about $40 per month on her cell phone calls.  Groceries average around $80 per month,  Gasoline is another $40 per month.  And she figures she’ll be able to spend $40 per month on clothing, movies and going out with her friends.  She adds all these up and sees that her variable expenses total $300 per month. • Vanessa subtracts her total expenses of $628 from her income of $780 to get $152.  Vanessa knows that she will need probably about $20 per week for snacks, incidental school supplies, etc.  That leaves $72.  Since Vanessa will have some money left over after taking care of her expenses, she decides to put at least $60 per month into savings for unexpected expenses, e.g., repairs to car, additional materials required for class, etc.

37. Is Vanessa’s spending within the budget guidelines? http://www.selu.edu/acad_research/programs/cse/finance/budget/

38. THE BEAN GAMELiving on a “20 Bean Salary” • Purpose Managing money means making choices. There is never enough money available for all of the things we’d like to have or do. This game will help you decide what is most important to you. • Do the work and Answer the questions on your own paper. • How to Play Round 1: Each individual receives 20 beans and a spending category sheets. The individual must decide how to spend their “income” based on life circumstances, values and goals. Each item has a set number of squares which indicates how many beans are needed to “pay” for that item. Round 2…….

39. It is said that money brings happiness, - BUT (behold the ultimate truth) -Money problems bring unhappiness that can stay with you for the rest of your life and affect your relationships. Finances affects everything!- We are in an Anti Dowry period – you take debt into a marriage instead of a dowry. Grandma's Advice Dave Ramsey Says: “Live like no other today so that one day you will live like no other.” • Fix it up • Wear it out • Make it due or • Due without.

40. Step 5 - Control • Joint Bank Accounts • Money is available to either the husband or the wife. Both are free to make deposits and withdrawals at will. • Separate Accounts • The two may each have their own account. In this method, the couple divides the expenses up between the two. • One Spouse Manages • One spouse gives the other money, as it is needed. • Envelope Method (link) • In this method several envelopes represents the budget categories. Each pay period money is placed in the assigned envelope until it is time for it to be spent/paid.

41. Step 6 - Evaluate • Monthly review your budget to see where changes need to be made. Evaluate how well you are meeting your financial goals.

42. gumball analogy Always have more money coming in than out! Work towards building wealth! • Income(money in) • Net Worth (wealth) • Flexible Expenses (money out) • Fixed Expenses (money out)

43. MONEY, MONEY, MONEY • Keep track of your spending and income for 2 weeks. • Every penny • Keep all receipts in an envelope • Complete the analysis questions. • Record your budget spending results • Create a new budget • Write an analysis for this