7.15.2.G1 The Essentials to Take Charge of Your Finances Spending plans Advanced
Dec 25, 2015
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
The Costs Add UpItem Average Yearly Expense
Daily Latte at $2.50
Eating lunch out 5 days per week at a cost of $5.00=$10.00 each time
Daily can of soda or chips at $1.00 each
Daily candy bar at $1.00
Daily can of chew or pack of cigarettes at $3.79
Weekly attendance at a sporting event with $3.50 admission and $5.00 for snacks
Monthly haircut at $25.00 per month
Monthly movie and popcorn for two at $20.00
Monthly gym membership at $38.00
Do not let money fly away! By creating a spending plan, a person can realize everyday expenses, reduce these expenses, and increase current income. Beginning at age 15, if a person saved $547.50 per year by not having a can of soda everyday, they would have $105,504 extra to retire on at age 50 with a 8.5% interest rate compounded yearly.
$912.50
$1,300.00-$2,600.00
$365.00
$365.00$1,383.35
$442.00
$300.00
$240.00$456.00
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Having a plan Financial planning
is a process individuals engage in to achieve long-term financial success while having a quality standard of daily living
A Spending plan is a paper or electronic document used to record both planned and actual income through expenditures over a period of time
Step 2– Creating
Personalized Income and
Expense Categories
Step 1- Track Current
Income and Expenses
Step 5– Evaluate and
Make Adjustments
Step 4– Implement
and Control Step 3– Allocate Money to
Each Category
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Income Gumball machine
represents components of the financial planning process
Income is money earned Gumballs going into
the machine Wages from a job,
allowance, gifts
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Expenses Expense is money spent Money going out of the
gumball machine Fixed expenses may
have a fixed amount due each month and are contractual
Flexible expenses can vary each month in the amount owed and are not contractual
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Spending plan activity Decide if each item is income, a
fixed expense, or a flexible expense Indicate a response by walking to
the corresponding activity sign
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Spending plan activityRent
Fixed expense
Wages
Income
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Spending plan activityGroceries
Flexible expense
Internet bill
Fixed expense
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Spending plan activityTips
Income
Utilities
Fixed expense
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Spending Plan ActivityAutomobile Registration
Fixed Expense
Eating Out/Snacks
Flexible Expense
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Spending Plan ActivityScholarships
Income
Hobbies
Flexible expense
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Spending Plan ActivityGift from Family
Income
Savings
Fixed Expense
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Developing a spending plan – step 1 Track current
income and expenses Individuals will
determine what income and expenses they have within a give period of time Usually concurrent
with an individual’s pay day Monthly Bi-monthly
Step 2– Creating
Personalized Income and
Expense Categories
Step 1- Track Current
Income and Expenses
Step 5– Evaluate and
Make Adjustments
Step 4– Implement
and Control Step 3– Allocate Money to
Each Category
How are you able to track
your expenses?
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Gross vs. Net Pay
• Total amount of money earned during a pay period (salary or hourly wage x hours worked)
Gross IncomeWhen calculating spending plan expense categories, use net pay
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
SAMPLE
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Creating personalized income and expense categories – step 2 Each spending
plan is unique because of individual and family values
Categories are based upon the individual’s/family’s income and expenses
Step 2– Creating
Personalized Income and
Expense Categories
Step 1- Track Current
Income and Expenses
Step 5– Evaluate and
Make Adjustments
Step 4– Implement
and Control Step 3– Allocate Money to
Each Category
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Spending plan category pie chart
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Housing Housing
Housing is the largest of the four major expenditures
Approximately 30% of an individual’s net income Monthly
payment – A fee charged each month to live in a home
Utilities – include electricity, water, and garbage fees
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Housing
What are examples of expenses that are associated with housing?
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Transportation Transportation
The second largest major expenditure
Approximately 20% of an individual’s net income Monthly
payment – is made if a loan is taken out to purchase a vehicle
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Transportation
What are examples of expenses that are associated with transportation?
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Food Food
The third most expensive category within an individual’s spending plan
Approximately 15% of an individual’s net income
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Food
What are examples of expenses that are associated with Food?
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Insurance Insurance
Arrangement between an individual and an insurance company to protect the individual against risk Risk is
uncertainty about a situation’s outcome
Approximately 7% of an individual’s income
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Insurance
What are examples of expenses that are associated with Insurance?
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Additional expenses Savings and
investing Save 3-6 months
of income that is available in a liquid account for emergencies
Other Fulfills additional
needs and accounts for 18% of an individual’s net income
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Allocate money to each category – step 3
Reference tracking from step one to be realistic about expenditures and income Think if there were any
unique expenses in the past month that should be included
Consider changes that need to be made Identify ways to
implement that change Consider financial goals
and money that needs to be allocated
Step 2– Creating
Personalized Income and
Expense Categories
Step 1- Track Current
Income and Expenses
Step 5– Evaluate and
Make Adjustments
Step 4– Implement
and Control Step 3– Allocate Money to
Each Category
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Allocate money to each category
Net gain is remaining money to either save, spend or invest
Net loss an individual is spending more money that he/she is earning and has to use credit (borrowed money) to meet their financial obligations
A spending plan should have income and expense matching one another (reach zero)
Income
Expenses
Net gain
or loss
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Implement and control – step 4 When individuals
implement their spending plan
Must develop control systems to track their income and expenses Continually compare
them to their spending plan to ensure they are on-track and make changes to prevent credit or savings use
Step 2– Creating
Personalized Income and
Expense Categories
Step 1- Track Current
Income and Expenses
Step 5– Evaluate and
Make Adjustments
Step 4– Implement
and Control Step 3– Allocate Money to
Each Category
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Implement and control There is not one correct control system.
Depends upon the individual/family Envelope systems – individuals place the
actual budgeted amount of cash from a paycheck into a specific envelope system for the expense
Check register system – This helps consumers to track all expenditures in a checkbook register which has been divided into spending plan categories
Electronic spending plan systems – Multiple types of software are available for consumers to use to help keep track of their financial records
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Evaluate and make adjustments – step 5 Assess if spending
plan is working Make changes if
necessary Analyze if goals
are being met Begin the process
again
Step 2– Creating
Personalized Income and
Expense Categories
Step 1- Track Current
Income and Expenses
Step 5– Evaluate and
Make Adjustments
Step 4– Implement
and Control Step 3– Allocate Money to
Each Category
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
gumball analogy
Income (money in) Net worth (wealth) Flexible Expenses
(money out) Fixed Expenses
(money out)
Always have more money coming in than out!
Work towards building wealth!
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
Insurance Includes the following:
Health – pays a portion of health care expenses if one is sick or injured
Disability – provides financial support if an individual is injured and cannot work
Life – provides financial support to an individual’s beneficiaries upon death
7.15.2.G1
© Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans AdvancedFunded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University
of Arizona
ANY QUESTIONS