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Money Management Strategies

Money Management Strategies. CHAPTER 5. Organizing Financial Records. CHAPTER 5 SECTION 1. What financial documents should you keep and organize?. What are some ways to organize these documents?. Money Management. Day-to-day financial activities necessary to get the most from your money.

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Money Management Strategies

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  1. Money Management Strategies CHAPTER 5

  2. Organizing Financial Records CHAPTER 5 SECTION 1

  3. What financial documents should you keep and organize?

  4. What are some ways to organize these documents?

  5. Money Management • Day-to-day financial activities necessary to get the most from your money. • Money trade-offs

  6. Financial Documents • First step in effective money management is to organize your financial documents. • Benefits: • Financial status • Pay your bills on time • Tax reports • Future planning • Investing decisions

  7. Storing Financial Documents • Locate your documents and sort them into categories such as payroll stubs, savings account, checking account, bills, etc. • Label and file each document • Maintain filing discipline

  8. Safe-Deposit Box • A small, secure storage compartment that you can rent at a bank.

  9. #1 Personal Financial Statements CHAPTER 5 SECTION 2

  10. Personal Balance Sheet • Allows you to have a complete look at your financial situation. • Step 1: Determine Assets • Step 2: Determine Liabilities • Step 3: Calculate Net Worth • Step 4: Evaluate Financial Situation Pg. 127 in text

  11. Determine Assets • Liquid Assets • Real Estate Assets • Personal Possessions • Investment Assets

  12. Liquid Assets • Cash and items that can quickly be converted to cash. • $800 in a savings account and $72 in cash • Your liquid assets are worth $872

  13. Determine Liabilities • Current (short term debt) - paid within one year • Long-term – Debts that require a longer term of repayment • Insolvency – the inability to pay debt when it’s due

  14. #2 Cash Flow CHAPTER 5 SECTION 2

  15. Cash Flow Statement • Movement of cash in and out of your wallet and/or bank account. • Step 1: Record your income • Step 2: Record your expenses • Step 3: Calculate your net cash flow • Pg. 131 - chart

  16. The next slide lists several types of accounts. Categorize each account as belonging to the personal balance sheet or cash flow statement.

  17. Take-home pay • Transportation • Checking Account Balance • Groceries • Credit Card Balance • Investment income • Student Loan Payment • Mortgage

  18. #3 Your Financial Position CHAPTER 5 SECTION 2

  19. What is your net worth? • Deficit – spend more than you earn • Loans make up for deficit – increases liabilities • Surplus – spend less than you earn • Increases net worth • Invest – pay off debts – etc.

  20. #4 Preparing a Budget CHAPTER 5 SECTION 3

  21. Budget • A plan for spending and investing your money to meet your wants and needs. • Step 1: Set your financial goals • Step 2: Estimate your income • Step 3: Budget for unexpected expenses • Step 4: Budget for fixed expenses • Step 5: Budget for variable expenses • Step 6: Record spending

  22. Budget Variance • The difference between the budget and the actual amount spent.

  23. Increasing Your Savings CHAPTER 5 SECTION 3

  24. Increasing Your Savings • Essential component – open a savings account • PAY YOURSELF FIRST! • PAYROLL SAVINGS DEDUCTION • SPENDING LESS TO SAVE

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