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Budgeting and Savings

Budgeting and Savings. Anne Marie Anderson, CPA & SIFE. Embrace your budget!. Goal setting Short-term (< 3 months) Present for boy/girl friend Duke Nukem video game Intermediate (3 months – 1 year) iPad Phone Long-term (> 1 year) Car 4 year college. Construct your budget.

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Budgeting and Savings

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  1. Budgeting and Savings Anne Marie Anderson, CPA & SIFE

  2. Embrace your budget! • Goal setting • Short-term (< 3 months) • Present for boy/girl friend • Duke Nukem video game • Intermediate (3 months – 1 year) • iPad • Phone • Long-term (> 1 year) • Car • 4 year college

  3. Construct your budget • Determine your time frame • Income • Gross vs net pay • Who is FICA and why does he take all my money? • Understand all items being taken out of your paycheck

  4. Construct your budget (cont’d) • Expenses • Fixed • Variable • Out of pattern • Goals as expenses • Savings • Fun! • Needs vs. wants

  5. Budget - Next steps • Evaluate your budget (positive/negative cash flow) • Monitor over time • Make adjustments as needed • Be flexible

  6. NJ Hypothetical Budget • Income - ?????? • --Expenses: • $400,000 NJ home, 30 year mortgage, $10K taxes

  7. NJ Hypothetical Budget - Month • Income - ?????? • --Expenses: • $2,800 Mortgage/Real estate tax • $300 Utilities • $150 Phone/Cable/Internet • $250 Car/Home Insurance • $200 Gas • $75 Clothes • $200 Food/Groceries • Total Expenses = $3,975

  8. NJ Hypothetical Budget – Month (cont’d) • Breakeven: • Net pay = Expenses, so you must bring home $3,975 per month or $47,700 per year to breakeven • $47,700 net pay is ≈ $70,000 gross pay after Federal, state, and FICA taxes • What did I leave out?

  9. How to Stick to the Budget • Goals on index cards – put them in the cash or credit card slot of your wallet • Make a picture of your goal the backdrop of your computer • Tell friends/relatives of your goals so they can help reign you in • Envelope system…..

  10. Savings/Financial Planning • Where to put what you save…. • 401K • Roth accounts • CD’s • Some places are better than others, but starting to save early is the key

  11. You Can Never Catch Up Person A: Saves $2000 per year from age 22 to age 35 and then stops Person B: Starts saving $2000 per year beginning at age 35 and never stops Both earn 8% on their investments. At age 75: Person A has $1M in savings Person B has $561K in savings

  12. How to Save • College students – I don’t have money to save! • Where can you cut? • Break your habits! • Include savings as an expense item in your budget - out of sight/out of mind • Direct deposit – split a portion into savings • Coins count - $15 billion in loose change

  13. Pitfalls…… • Credit cards…….. • Be wary, credit card companies prey on college students. • Rule of thumb – if you don’t have the cash to buy something, wait until you do! • Pay more than the minimum payments – ALWAYS! • Debt consolidation companies…..more harm than good? • Call credit card companies directly

  14. Did you know? • The average person spends money 3 times a day. • Putting aside every coin you touch results in saving about $50 a month. • A $5 sandwich usually has less than $1 of ingredients. • Some 40% of American families annually spend more than they earn. • Americans spend more than 40% of their food dollars each year eating out. • One out of every four Americans believe their best chance of getting rich is by playing the lottery. • The average interest rate on credit cards is 18.9%.

  15. Some helpful resources • College Money Insider • http://www.overturemarketplace.com/insider • Managing your money while in college • http://moneyfor20s.about.com/od/makethemostofyourmoney/tp/collegemoney.htm • 360 degrees of Financial Literacy • http://www.360financialliteracy.org/Life-Stages/College-Students • Debt consolidators (reputable ones…) • http://www.360financialliteracy.org/Topics/Credit-and-Debt/Credit-Cards/I-m-one-of-those • Student budget calculator • http://www.360financialliteracy.org/Topics/Budgeting-Spending/Budgeting-and-Saving/Student-Budget • Feed the Pig • http://www.feedthepig.org

  16. A final thought….. • http://www.youtube.com/watch?v=gZkuWLdSpuk

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