BUDGETING How Will You Use Your Money?

1. WHAT’S AHEAD Choose Financial Goals Track Income and Expenses Your Budget Worksheet BUDGETINGHow Will You Use Your Money? 21dt Century DVD/WS; hand out spending record

2. What Kind of Spender Are You? Spending Challenge Reality Check Test Your Knowledge!

3. Allows to meet personal goals with system of saving and wise spending. • May be plan to spend and how much you want to save. • May be more detailed record that includes specific amounts to be spent in categories • such as food, clothing, and transportation. • WANT vs. NEED What is a budget?

4. Choose Financial Goals Track Expenses and Income Prepare Budget Worksheets Review and Adjust Your Budget Worksheet The Budget Process

5. Choose Financial Goals

6. 5 pop/week @ $1.50 each = $390.00 • 3 Candy Bars @ $1.00/wk = $144.00 • 7 pack cigarettes/week @ $5.58 (MO) = $2031.12 • $11.90 in NY = $4331.60 • 2 meals out/wk @ $6.40 each = $12.80 = $665.60 • Dinner/Movie for 2 twice per month = $1694.40 $12/$8 • 15 gallon gas @ $3.50/gallons/week = $2730.00 What if you Spent? (per year)

7. Budget • plan for dividing income among spending and saving options • Short-term financial goals • Within one - two years • Intermediate financial goals • Long-term financial goals • Two + years • Balancing short-term spending with long-term success Types of Financial Goals Write 5 goals

8. Your family and your goals • Your current family • Your future family • Your community and your goals Cost of College Your Goals Affect Others If I had $50 activity

9. Specific Measurable Attainable Realistic Time-Bound SMART Goals To save $25 per week out of my paycheck for six weeks to buy a hunting bow. To save $25 a week for two months by working part time to buy a prom dress. Research what each mean; handout on SMART goals

10. I am going to buy a kindle fire. To buy a laptop before I graduate. Save 3,000 by 2015 for a car. Use SMART guidelines and redo goals above

11. Track Income and Expenses

12. Track your income Track your spending Establish a filing system Effective record keeping How to use financial records Keep Financial Records

13. Gross Income vs. Net Income • Taxes • Federal Income tax • State Income tax • FICA (social security) • Medicare • Show me the money (or lack thereof) So how much money do I have? Gross/Net wagers; My budget ws

14. Budgeting Categories • Savings • Food • Personal • Clothing • Household • Transportation • Health and Medical • Recreation • Education • Gifts and Contributions • Investments • Emergency fund • Mortgage • Taxes • Day Care • Others?? Sample Budget Worksheet

15. Envelope System • Useful if pay bills in cash each month. • Pay bills right away so not tempted to spend money on something else. • Budget Box System • Small box with dividers for each day of month, like filing system. • When receive bill, check due date, place behind card that represents due date. As receive income, pay all bills that are due. • Computer Software • Create spreadsheet • Purchase personal finance program. <$75 • Important to enter transactions frequently to truly understand financial position. Budgeting Tools

16. Fixed expenses • Same amount each month • Ex: Car or house payment or rent • Flexible (variable) expenses • Not a set amount each month but must pay • Ex: Electric bill, phone bill, water bill • Discretionary (periodic) expenses • Choose to spend or not to spend • Ex: buy sweater, eating out, sporting events Expenses

17. Prepare Budget Worksheet

18. Step 1: Create a worksheet – a planning document on which you record your expected and actual income and spending over a period of time Step 2: Estimate your income – Must be real Income and your NET income! Step 3: Estimate your expenses and savings Step 4: Record your actual income and expenses Step 5: Calculate the differences Create Your Budget Worksheet Discuss in class – actual/over activity

19. Few consumers have realistic budgets. • Here are some reasons for this. • Some people get too specific. • Some people don’t predict the correct amount of their flexible expenses. • Some people lump too many expenses under miscellaneous. • Some people give up on budgets because they think budgets takes too much time and effort. Budget Pitfalls

20. Keep it simple. Easier your budget is, easier to stick to. Be realistic. Income < Expenses, your budget will show that. Don’t spend money you don’t have. Keep day-to-day records. Easy to forget what you spend unless record daily expenses. Keep your budget, incoming bills, receipts, and canceled checks all in one place. Will help to organize budgeting efforts. Choose a definite time to pay bills and review your budget. Will prevent budget from “getting away from you.” Increase likelihood payments will be made on time. Tips to Help You Stick to a Budget Research and write 10 tips

21. Set savings goal and stick to them • Avoid carrying too much cash • Eliminate impulse buying • Watch for sales • Plan ahead for large purchases • Pay bills on time • Review budget often What Can I do to Stick with My Budget?

22. Review & Adjust Budget Worksheet

23. Adjust your spending • Budget Variance • Any differences between actual and budgeted amounts • Deficit • Actual spending > budgeted spending • Surplus • Actual spending < budgeted spending • Make several plans • If $ left over = save! • If break even = rut = make a change! • If short = debt = credit cards! Review & Adjust Gabrielle budget

24. List debt smallest to largest Pay minimum payments on all except for smallest one Pay off lowest, then add amount to next owed bill Pay off and continue to add to the next bill until all are paid off. Then SAVE what you were paying! Snowball Effect Jackie Budget

25. Sample Family Budget

26. Roommate/travel activity test