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Budgeting

Budgeting. Financial Planning Mr. Yates. Creating a Budget. Creating a budget is the first step to successful money management. How can you manage your money if you don't know how much you have or what you're spending it on? . 2 Parts…. A budget has two parts, income and expenses .

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Budgeting

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  1. Budgeting Financial Planning Mr. Yates

  2. Creating a Budget • Creating a budget is the first step to successful money management. • How can you manage your money if you don't know how much you have or what you're spending it on?

  3. 2 Parts… • A budget has two parts, income and expenses. • The object is to keep your expenses at or below your income. • Sounds easy, but as we all know, it can get a little tricky sometimes.

  4. Step 1 – List Expenses • If you are not sure of the amount, go back through your checkbook or online banking record for the past few weeks or months to get an idea. • For items you pay cash for, such as fast food, think about how many times per week or month you normally spend money on that item and how much you pay each time.

  5. Expenses - Housing • Groceries • Cleaning supplies • Laundry • Dry cleaning • Home improvement projects • Towels, Sheets… • Clothing • Mortgage payment or rent • Insurance • Taxes • Electric • Natural gas • Water • Garbage pick-up

  6. Expenses – Trans + Ent. • Cable TV or satellite service • Internet access • Dining out • Bars, clubs, etc. • Sporting events • Parties • Lessons and recitals • Clubs • Car payments • Insurance • Gas • Routine Maintenance • Repairs • Air travel • Rental cars • Public transportation

  7. Expenses – Health, Comm. • Telephone • Cellular phone • Voice mail, etc. • Hair cuts, coloring, etc. • Make-up • Medical, dental, vision • Weight loss, diet products • Nutritional supplements

  8. Expenses – All the rest! • Vacation • Spending money • Donations to church or charity • Gifts (Christmas, birthdays, anniversary, etc.) • Emergency fund • Coffee, soda, cigarettes, etc. • Credit card payments • Other loan payments • Child care • Items for baby/elderly • Allowances for children • Book clubs, magazines, music, etc. • Fast food • Investments

  9. Add it up… • Figure all expenses as a monthly amount. • For example, if your property taxes are due once per year, divide the amount by 12 to get a monthly figure. • If your expenses are lower than your take- home income, skip to step 4. • If not, continue on to step 3.

  10. Step 3 – Cutting Back • Most likely, you have more "I wants" than you have money for, or you wouldn't have the need for a budget. • Deciding what to cut is the hardest part of making up a budget. • Start by determining how much you need to trim. • To do this, subtract your income from your expenses. • If your take-home pay is $2000 per month and your list of expenses came to $2200 per month, you need to trim $200 per month. • The figure may seem daunting at first, but if you look hard enough at your expense list, you can usually find a few items that are easy to cut.

  11. Suggestions for Cutting Back • Eliminate cable/satellite service or cut back on extra subscription channels. • Switch to a free Internet access provider if you are paying for internet access. • Cut back on smoking if you can. • Cut back on caffeine if possible. Drink water. • Take lunches to work instead of eating fast food. • Shop around for cheaper home and auto insurance. • Use coupons and online services to save money on groceries. • Rent videos instead of going to the movies.

  12. More Cutbacks • Turn down the water level on your washing machine and dishwasher if it is adjustable. • Turn the lights off. • Turn the heat or air conditioning down while you are not home. • Don't overheat or overcool when you are home. If you can stand it at 80 degrees in the summer, don't turn the A/C to 67. • Find a bank with a no-fee checking account if you don't have one. • Research the 10-10- access codes for long distance. You should be able to get long distance for about 5 cents per minute. • Talk on the phone less. You have a free ISP, right? E-mail as many people as you can instead of calling. Talk everyone you know into getting ICQ so you can chat or send messages back and forth.

  13. The Percentages • Use the following guidelines to review the items in your budget, and make special note of expenses that are out of line: • Housing 35% - Mortgage or rent, taxes, repairs, improvements, insurance, and utilities • Transportation 20% - Monthly payments, gas, oil, repairs, insurance, parking & public transportation • Debt Budget 15% - Credit cards, personal loans, student loans & other debt payments • All other expenses 20% - Food, insurance, prescriptions, doctor & dentist bills, clothing & personal • Investments & Savings Budget 10% - Stocks, bonds, cash reserves, art, etc.

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