Budge Budge ting ting Introduction to Business & Technology
Dec 30, 2015
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Introduction to Business & Technology
What is a Budget? A plan for
spending and saving money
Most people think budgets are: Rigid and inflexible
Painful – who wants to eat Top Ramen every night!
No fun!“A budget takes the fun out of money” – Mason Cooley
Why Budgets Make Sense Budgets help you:
Set priorities
Achieve what’s important to you
A good budget is: Realistic Ongoing Clear and easy to
use
Budget Categories Income
Gross Net
Savings Emergencies Long-Term Retirement Short-Term
Expenses Fixed Variable Discretionary
Income: Money Earned Gross income: An
individual’s income before taxes.
Net income: Income after taxes are paid.
Taxes- Georgia state taxes
can range from 1-6% depending on your income
Federal Taxes also vary by income and can range from 10-39.6%
Taxes and Deductions
Say your first job pays $30,000/year: Your salary is your gross income (30,000). Take off at least 25% for taxes and other deductions to find your net income. That’s what’s left for you to spend.Example:
Gross salary = $30,000Minus 25% taxes and deductions - 7,500Net income $22,500
Savings: Pay Yourself First Savings- unspent incomeTypes:
Emergencies: Plan to set aside three months’ living expenses
Long-term: Large ticket items (house, car, college)
Retirement: It’s never too early to start
Short-term: Vacation, clothes, new skis
“When it rains, it pours- make sure you save for the rainy day,” Anonymous
Interest on Savings Accounts Interest: when you save your money in a savings account with a bank, they will
pay you with interest. They are paying you because:
1) It is incentive to use their banking services
2) They use your money for capital and investments
Interest rates are a percentage of the money that you get back based on the amount you invest with the bank; so the more you put in, the more money you get back. These rates vary from bank to bank.
“CD”- an agreement that locks your money into an account that you cannot access for a set amount of time, but a bank will give you a higher fixed interest rate for compensation. A CD…
1.) Generally lasts for 1-5 years 2.) Cannot be accessed by the depositor (unlike savings
accounts) 3.)Has a higher interest rate as opposed to savings
accounts
Savings: Certificate of Deposit
Savings: Stock Investments
Stock- a type of money investment that signifies ownership in a corporation and represents a claim on a part of the corporation’s assets, earnings, and losses. Stocks are usually…
1.) Long term investments 2.) Extremely variable 3.) Not guaranteed (savings accounts & certificates of
deposit are guaranteed by our government)
Personal Savings Rate Declining
1974 to 1984 10% 1985-1994 Fell to
4.8% 2004 1.8% 2005 -0.5% 2006 -0.7%
This is the first time the rate has not been negative since the Great Depression}
Expenses Expense: A cost
to meet a need or pay a debt
Types of expenses Fixed Variable Discretionary
Needs vs. WantsNeeds are
essentials: Food Shelter Clothing Transportation
Wants are extras: Eating out Big, expensive house Shop till you drop Brand-new or
expensive car
Fixed ExpensesCosts that occur regularly and do not vary in amount
Rent Mortgage Car payment Insurance premium School loans Others?
Variable ExpensesCosts that occur regularly but may vary in amount:
Electricity Water and Garbage Telephone Gasoline Groceries
Ways to Reduce your Grocery BillMake a shopping list
Study grocery ads
Buy store-brand products
Avoid impulse purchases
Learn the basic prices of your favorite foods.
Discretionary ExpensesCosts determined by personal wants that may be controlled
Movies, videos, CDs Sports Eating out Grooming and
clothes Concerts and plays Vacations Others?
Budget Summary
Establish a budget: Income Savings Expenses
Fixed Variable Discretionary
End up with a budget surplus and you’re a success!