Back to Table of Contents pp. 454-469 Chapter 28 Planning a Budget.

Back to Table of Contents

pp. 454-469

Chapter 28 Planning a Budget

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Introduction to Business, Planning a Budget Slide 2 of 59

Why It’s ImportantWhy It’s Important

Budgeting techniques help you keep track of where your money goes so that you can make it go further.

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Introduction to Business, Planning a Budget Slide 3 of 59

Lifestyle CostsLifestyle Costs Money management is the process of planning how to get the most from your income.

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Lifestyle CostsLifestyle Costs A budget is a plan for using your income in a way that best meets your wants and needs.

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Lifestyle CostsLifestyle Costs A budget includes a record of your expected income, your planned expenses, and your planned savings over a certain period of time.

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Lifestyle CostsLifestyle Costs The five steps in planning a budget are:

• Setting your goals • Estimating your income • Estimating your expenses

continued

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Lifestyle CostsLifestyle Costs

• Planning for savings• Balancing and adjusting your budget

as needed

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Set GoalsSet Goals A budget should help you decide which goals you can meet with the amount of money you have.

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Estimate IncomeEstimate Income Your income is the actual amount of money you earn or receive during a given time period.

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Gross PayGross Pay Your gross pay is the total amount of money you earned for a specific time.

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Net PayNet Pay Your gross pay is reduced by various deductions, or amounts that are taken out of your pay before you receive your paycheck.

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Net PayNet Pay Your net pay, or take-home pay, is your gross pay minus deductions.

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Other IncomeOther Income If your net pay is the only income you have to consider, it’s easy to figure your total income.

If part of your income is from tips, don’t overestimate how much you expect to receive in tips.

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TaxesTaxes Withholding, or subtracting taxes from a paycheck to be forwarded to the government, may include federal, state, and local income taxes.

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TaxesTaxes Employers are responsible for forwarding the taxes that are withheld to the government.

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TaxesTaxes Workers who don’t have all taxes withheld from their paychecks must budget for payment of those taxes.

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Estimate ExpensesEstimate Expenses Items you have to spend money on such as food, rent, and clothing are called expenditures.

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Estimate ExpensesEstimate Expenses The two basic types of expenses are:

• Fixed expenses• Variable expenses

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Fixed ExpensesFixed Expenses Fixed expenses are expenses that occur regularly and that are regularly paid.

For example, rent and insurance.

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Variable ExpensesVariable Expenses Variable expenses are expenses that fluctuate from month to month.

For example, food and entertainment.

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Plan for SavingsPlan for Savings Savings protect you against expenses that you didn’t budget, that are higher than you expected, or that are completely unexpected.

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Balance and Adjust the BudgetBalance and Adjust the Budget The total estimated income for a period should equal the total estimated expenses.

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Balance and Adjust the BudgetBalance and Adjust the Budget The difference between how much you planned to spend and how much you actually spent is the budget variance.

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Figure28.2 THE KEMALS’ FAMILY BUDGET

A budget should be broken down into annual and monthly amounts for each category.

Identify how much the Kemals spend on insurance payments.

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Using a Computer for BudgetingUsing a Computer for Budgeting With a computerized budgeting program, you can store your budgeted amounts and enter your expenses as they occur or at the end of the month.

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Using a Computer for BudgetingUsing a Computer for Budgeting The computer can give you a quick analysis of total expenses, including amounts that are over and under the budget.

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Using a Computer for BudgetingUsing a Computer for Budgeting In addition, the computer can help with “what if” situations.

For example, what if Nora Kemal’s income increased by ten percent, or their rent increased by $50 a month?

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Introduction to Business, Planning a Budget Slide 28 of 59

HW page 466-467 # 1-18