Checking Account Management and Budgeting

1. Unit 2 – Personal Financial Management Checking Account Management and Budgeting

2. Objectives • Discuss the purposes of & tips for writing checks. • Demonstrate how to write a check. • Discuss the purposes of a checkbook register. • Demonstrate how to balance a checkbook. • List and discuss the steps in preparing a budget.

3. 1. Purposes for Writing Checks Writing a check is an alternate method of payment other than cash. Possibly the easiest way to withdraw money from your account. Convenient way to pay bills & protect money from being lost or stolen.

4. 1. Tips For Writing Checks • Write clearly • Write in ink • Fill in all blanks • NEVER sign a blank check • Sign your checks the same way every time • Checks with mistakes need to be voided or torn up.

5. 2. Demonstrate How to Write A Check Start by writing in the date & the payee’s name:

6. 2. Demonstrate How to Write A Check Write the amount of your payment in numeric form.

7. 2. Demonstrate How to Write A Check Write out the amount of your payment using words instead of numerals.

8. 2. Demonstrate How to Write A Check Sign your check, and you can write a memo if you like.

9. 3. Purposes of a Checkbook Register • A checkbook register is a small booklet that you keep with your checkbook for recording deposits made & checks written. • It allows you to tell, at a glance, how much money you have in your account.

10. 3. Purposes of a Checkbook Register • Reasons for keeping a checkbook register in order: - shows your balance at all times. - helps to avoid overdrafts - keeps a written record of checks written. - shows dates of checks & deposits. - provides a record to compare with your bank statement.

11. 4. Demonstrate How to Balance a Checkbook (Register) • Follow these steps in order to balance your checkbook: • Reconcile Your Checks • Reconcile Your Deposits • Record Interest Earned and Bank Fees • List Outstanding Checks • List Outstanding Deposits • Record Your Bank's Ending Balance • Enter Outstanding Deposits • Enter Outstanding Checks • Calculate Your Balance

12. 5. Preparing a Budget • A budget is a plan for spending & saving money. • A personal budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal budget.

13. 5. Preparing a Budget • Follow these steps when preparing your personal budget (these steps are recommended for high school students only – there are more steps for balancing a family budget): Record Weekly Expenses - Record on one sheet of paper your expenses for an entire week. Make a column with the words Monday, Tuesday, Wednesday, Thursday, Friday, Saturday, Sunday and Total in them. You can record your expenses daily under each day of the week, then add these up for the total at the end of the week.

14. 5. Preparing a Budget • Examples of your weekly personal expenses could be dining out, entertainment, groceries, clothing, gasoline, miscellaneous, etc.

15. 5. Preparing a Budget Record Monthly Expenses - Things like the mortgage, cable, cell phone, electric, car payment. Some of these expenses may not be the same each month (like the electric bill). You should figure an average monthly amount for these.

16. 5. Preparing a Budget Figure in Variable Expenses - like car maintenance (oil change), pet care (vet bills), medical expenses (physician co-pays, deductibles, prescriptions or prescription co-pays). Go through your financial records and write down every expense you can find that did not occur on a regular monthly basis. When you’re done, add the total amounts for the year, divide by twelve, and this will give you an estimate of what you should be setting aside each month to budget these expenses. This is a variable expense monthly allowance to be included in your budget as a monthly expense.

17. 5. Preparing a Budget Budget for Unexpected Expenses – this needs to be treated as an emergency or savings fund. There is a big possibility that you will not know when you are going to have car problems. Start with 10-15 % of your income and cut back to as little as 5% if you need to balance the budget. But, do save something!

18. 5. Preparing a Budget • Create a budget with a good spending plan that cuts out unnecessary spending, & reduces monthly bills and expenses to the bare minimum. Save money in every area of your budget. Remember, $10 a month doesn’t sound like a lot. But, a savings of $10 per month is $120 per year that you can apply somewhere else in the budget.

19. 5. Preparing a Budget • Every dollar you free up helps bring the budget into balance - helps you live within your means. • Don’t spend more than you have. • Prepare a budget.