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Building a Budget

Building a Budget. Objective: Develop a plan for managing earning, spending, saving and giving using spreadsheets, online resources or commercial software. . What does a budget look like for a family or single adult?.

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Building a Budget

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  1. Building a Budget Objective: Develop a plan for managing earning, spending, saving and giving using spreadsheets, online resources or commercial software.

  2. What does a budget look like for a family or single adult? • The first step in any budget is to evaluate the anticipated sources of income. • You start with the average monthly and yearly income from your job. • Ex: $3,300 per month = $40,000 per year • Also include any additional sources of income such as: Rental Property income, interest on savings or investments, part time jobs or a small business you might start.

  3. Getting Started • Remember... We are not Congress, so we can NOT spend money that we do NOT have. • Put your total bring home pay at the top of your budget. • For example if your monthly income was $3,300.00 (based on $40,000 annually) then you would subtract at least 15% due to taxes. • We are left with $2,805.00 • Now we start to make our money work for us.

  4. Human Habitat • When we discuss habitat in other classes we know that animals need food, water, cover and space. • Humans also have the basic needs of: • Food • Utilities • Shelter (Housing) • Transportation

  5. Food • The Average Family spends almost $550.00 a month on Food. • Tips to cut down. • Make a List • Cook your food • Coupon, sales etc. • Never shop while hungry!

  6. Utilities • This includes Water and Power (possibly gas if applicable) • Other utilities are not essential and will be discussed later in the budget. • The average water bill in our area is around $40 a month. • Power bills can vary depending on the size of the home/apartment, and the time of the year. • The average electric bill in our area is $175.00 a month.

  7. Housing • Housing is generally one of the biggest expenses in the budget. • Housing expenses vary widely based on many factors such as: Rental vs Ownership, Size of the property, Location, etc. • While home ownership is considered the only “good debt” by many, a mortgage is still a risk that should only be entered into under stable conditions. • Most start out renting. The average apartment cost in Huntsville is around $500.00.

  8. Transportation “The X Factor” • You can spend as much as you want to on transportation. • Many financial advisors advise AGAINST car payments, because cars depreciate in value. • Studies show that after paying off a car over a 5 year span many times the value of the car has depreciated to 1/5 of the amount paid. • Ex: $30,000.00 new car usually worth around $6,000-$10,000 after 5 years.

  9. Drive Smart • Save and Pay cash for quality used vehicles. • You will still need to budget at least $350 a month for gas and insurance, but you’ll save the $475 avg. car payment. • City living offers cheap alternatives like bicycles, public transportation, etc.

  10. Other budget items • Phone service = at least $50 per month • Cable = $50 • Internet = $45 • Clothing, Savings, Giving and Entertainment are up to you!

  11. Guidelines on Saving • Save at least 10% of your income for emergencies and major purchases. • Experts recommend at least 3-6 months living expenses in savings as an Emergency Fund. • Savings above and beyond that can be used to make major purchases like a newer car, home renovations, LCD w/PS 4, etc…

  12. Credit Cards, Borrowing and Leasing • Credit cards are available to you after you turn 18. • As a matter of fact you are their target market. • DANGER – Remember you are going into debt and must pay it back with interest. • If it wasn’t in your budget to start with then how can you pay it back? • Also, you are paying others to use their money (interest).

  13. Leasing • Studies show that leasing, or rent to own, is the most expensive way to own. • Leasing a car is often the most expensive way to drive a car. • Cash has advantages. • Cash discounts • Saving on interest • No risk • Immediate ownership

  14. Summary • Take charge of your finances and let your money work for you with a budget. • Save for big purchases like cars or a down payment on a house to minimize risk and save on interest. • BE REALISTIC!!! • Work for your dreams. Remember that you can’t borrow your way into the dream life. • When you are ready to buy a house, experts recommend a 10-20% down payment with a monthly mortgage that does not exceed 25% of your monthly income.

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