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Introduction to Budgets

Learn about the basics of budgeting, financial statements, and how to manage your money effectively. Understand the importance of balance sheets, cash flow statements, and budgets in achieving your financial goals and living within your means.

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Introduction to Budgets

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  1. Introduction to Budgets Family Economics & Financial Education

  2. Wealth • Having a large amount of money or valuable possessions • Can help a person achieve financial goals

  3. Financial Statements • Showfinancial data and information regarding money • Can show financial status of a family or individual • There are 3 types: • Balance sheet • Cash Flow Statement • Budget

  4. Balance Sheet • A balance sheet is also called a net worth statement • Shows assets, liabilities, and net worth on a particular date • Assets-everything a person owns with monetary value • Liabilities - debts or what is owed to others • Net worth - money left when liabilities are subtracted from assets

  5. Balance Sheet • Shows financial status at one point in time People need to know where they stand before they can create a financial plan

  6. Cash Flow Statement • Lists all monetary actions in a given time period • Foundation for a budget

  7. Budgets • Future oriented tool • Assists in money management • Two main components • Income • Expenses

  8. Income and Expense Definitions • Income • Total money received • Expenses • Total money paid • Net gain • A person is making more than they are spending • Net Loss • A person is spending more than they are making

  9. expenses • 2 types: Fixed and Variable • Fixed Expenses: Same amount paid each month, your bills (auto, rent, water, electricity, etc) • Variable Expenses: Daily expenses (dinners out, movies, hobbies, etc)

  10. Budgets • Income and expense are ESTIMATEDguidelines for monetary transactions for a specified time period • After the time period is over, the spending plan is evaluatedand revised for next time period • Different from income and expense statement because it is an estimate for the next month’s spending

  11. Budgets • Why is a spending plan important? • Can give a person a strong sense of where money is going • Allows for income and expensetracking • Helps meet financial goals • Helps a person live within their income • Reduces need for credit and gaining debt

  12. Comparing Statements • Balance Sheet • Current financial standing • Need to create a balance sheet before a family or individual is able to create an income and expense statement • Cash Flow Statement • Lists all monetary transactions • Foundation for spending plan • Budget • A future estimate of how to manage money based on the income and expense statement

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