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Spending Plans

Learn how to develop a personalized spending plan and track your income and expenses to achieve your financial goals. This advanced level course will help you assess your spending habits and make necessary changes. Develop a plan, allocate money to each category, and control your spending. Increase your net worth and financial well-being. Get started now!

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Spending Plans

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  1. Spending Plans “Take Charge of Your Finances” Advanced Level

  2. Where’s My Dough? Divide your play dough to show how much is spent on each expense How much do you spend on each expense? What expenses do you have? Play dough = income Based upon your current spending, is it realistic to achieve your goal? You have begun to develop a spending plan! Adjust your play dough to reach your goal Write a personal financial goal

  3. What is a Spending Plan? Document used to record both planned and actual income and expenses over a period of time A budget

  4. Money Management Tools Statement of Financial Position Income & Expense Statement Spending Plan What is my future money management plan? What is my financial position today? How have I managed my money in the past? Determine what changes to make Make changes

  5. A forward-looking Income and Expense Statement May use the same template for both the Income and Expense Statement and the Spending Plan 

  6. Why is a Spending Plan an important part of financial planning? Help manage your money in a positive manner Analyze the opportunity costs of your trade-offs to maximize financial well-being Increase net worth Helps set and reach goals

  7. Congratulations! You have been hired as a financial advisor for John and Tia Brown • Developed a Statement of Financial Position and Income and Expense Statement • Identified the following goals: • Develop a spending plan for the Brown family Increase the amount of their emergency savings fund Pay more on their monthly car loan payment to pay the loan off faster Spend less money on clothing every month Spend less money dining out at restaurants

  8. Spending Plan Development Process Step 1 - Track Current Income and Expense Step 5 - Evaluate and Make Adjustments Develop the spending plan Maintain the spending plan Step 4 - Implement and Control Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category

  9. Track Current Income and Expenses Step 1 - Track Current Income and Expense Step 5 - Evaluate and Make Adjustments Step 4 - Implement and Control Step 2 - Personalize Your Spending Plan Ensures spending plan is realistic Step 3 - Allocate Money to Each Category

  10. The Brown FamilyStep One: Track Current Income and Expenses Kept all receipts for the month of January to create an Income and Expense Statement Review John and Tia’s January Income and Expense Statement for a realistic view of their income and expenses

  11. Personalize Your Spending Plan Step 1 - Track Current Income and Expense Step 5 - Evaluate and Make Adjustments How will you develop a spending plan? What is the intended time period for your spending plan? Step 4 - Implement and Control Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category What categories will your spending plan include?

  12. How will you develop a spending plan? Paper and pencil Spreadsheet How would you develop a spending plan? Money management computer software Applications

  13. What is the intended time period for your spending plan? What categories will your spending plan include? • Usually concurrent with pay period • Reference tracking from the Income and Expense Statement • Do any categories need added, changed, or removed? What time period would you choose for your spending plan?

  14. The Brown FamilyStep Two: Personalize Your Spending Plan • Requested a spending plan for the month of February • Requested the same document and categories as the Income and Expense Statement • Find the column on the Income and Expense Statement where the Spending plan will be created

  15. Allocate Money to Each Category Step 1 - Track Current Income and Expense Step 5 - Evaluate and Make Adjustments Reference tracking from Step One Step 4 - Implement and Control Step 2 - Personalize Your Spending Plan Determine what changes to make Step 3 - Allocate Money to Each Category

  16. When allocating money consider: Trade-offs and opportunity costs Contractual expenses Goals Required to pay expense for a specific amount of time - not easy to reduce or eliminate Easy to reduce or eliminate Rent, Internet, Cell phone Food, entertainment

  17. Spending Plan Guide What variables may cause these percentages to be different?

  18. Net Gain or Net Loss? • Add more money to savings or another expense • Increase income • Decrease expenses • Both

  19. The Brown FamilyStep Three: Allocate Money to Each Category • Indicated a * next to expenses that are either contractual or they are unwilling to decrease • Remember goals • Consider trade-offs • Must have a net gain or a zero balance

  20. The Brown FamilyStep Three: Allocate Money to Each Category • Develop a spending plan for the family • Explain each change made • Re-write goals into SMART goals using their new spending plan

  21. Implement and Control Step 1 - Track Current Income and Expense Step 5 - Evaluate and Make Adjustments Step 4 - Implement and Control Step 2 - Personalize Your Spending Plan Use a control system to stay on track Step 3 - Allocate Money to Each Category

  22. Control Systems Which control system would help you stick to your spending plan? Internet-based spending plan program Depository institution programs Check register system – using bank register to track net gain or loss Envelope system – write on envelope net gain or loss

  23. The Brown FamilyStep Four: Implement and Control

  24. Evaluate and Make Adjustments Step 1 - Track Current Income and Expense Step 5 - Evaluate and Make Adjustments Is your spending plan helping you reach goals? Step 4 - Implement and Control Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Do you need to make any adjustments?

  25. The Brown FamilyStep Five: Evaluate and Make Adjustments How could creating a spending plan help you now and in the future? • Increase their grocery budget by $20.00 • How has developing a spending plan helped the Brown family? • John and Tia realized that if they dine out at restaurants less often they will need to increase their monthly grocery expense

  26. Summary Step 1 - Track Current Income and Expense Step 5 - Evaluate and Make Adjustments • A spending plan is an important financial planning tool • Helps achieve goals • Make your spending plan work for you • Make sure to control, evaluate, and adjust your spending plan Step 4 - Implement and Control Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category

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