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Unit 2 Budgeting

Unit 2 Budgeting. In this unit, you will…. Examine your spending habits Know the benefits of having a spending plan, or budget Identify various sources of income Identify types of expenses Know the importance of saving (paying yourself first) Be able to construct a budget

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Unit 2 Budgeting

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  1. Unit 2Budgeting

  2. In this unit, you will… • Examine your spending habits • Know the benefits of having a spending plan, or budget • Identify various sources of income • Identify types of expenses • Know the importance of saving (paying yourself first) • Be able to construct a budget • Examine forms of record keeping involved with budgeting and cash management • Consider how a budget will change throughout your life

  3. Budget • Budget: • A “spending plan” • Plan for managing your money during a given amount of time • Income vs. expenses • NOT about giving up favorite things • IS about seeing your options and making smarter decisions

  4. BudgetPart 1: income • Income • Money you receive • Examples: Job, allowance, birthday money, money from selling stuff, interest earned on your savings account

  5. BudgetPart 1: income • Example: • Paid $8/hour, work 20 hours/week • How much should your paycheck be each week? • Why isn’t your paycheck $160??? • TAXES! • Support govt programs • Schools, roads, armed services, retirement income for elderly • Applied to income, property, and goods

  6. BudgetPart 1: income • Four payroll deductions on a pay stub • Federal income tax • Fee collected by the federal govt to supports its programs • State income tax • Fee collected by state govt to support its programs • FICA (Federal Insurance Contributions Act) • Social security tax • Small income for elderly, disabled, and orphaned • Medicare tax • Provides medical insurance to elderly and some disabled • Later in life…health insurance, retirement savings

  7. BudgetPart 1: income • Gross income: • Income BEFORE deductions • Net income: • Income AFTER deductions • “Take home pay”

  8. Mind break… • The average person spends money ___ times a day. • A $5 sandwich usually has less than $__ worth of ingredients. • If you purchase a soda a day for a year, you will have spent approximately $____.

  9. BudgetPart 2: Expenses • Expenses: • What you spend your money on • Three types • Fixed: cost the same every time • Variable: fluctuate in amount • Periodic/occasional: don’t pay every month, can be fixed or variable

  10. BudgetPart 2: Expenses • Where do your expenses fall?

  11. BudgetPart 2: Expenses • The MOST important expense: • PYF: Pay Yourself First • Example: • From each paycheck ($150) you receive, you immediately save $20.00 for later • Should try to save ___% Think back to one of the SMART goals you set during Unit 1… How much do you need to save in order to meet your goal(s)?

  12. Building a budget • Time Frame • Money coming in • Categorize your expenses Group as fixed and variable Remember PYF! • Subtract your total expenses from total income. Adjust until 0. • Step back & take a look! Do you need to tweak your plan to be in line with your financial goals?

  13. Build a Budget for Jessica

  14. Keeping track… • Important documents to keep: • Checking acct statements • Savings and investment statements • Pay stubs • Tax documents • Insurance statements • Loan and credit card statements • Receipts and warranties for large items

  15. Staying on track • Methods to stay on track with your budget… • Envelope system • Checking Account Register • Budget Spreadsheet • Personal Finance Software • Online Programs • www.mint.com

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