Budgeting: Making the Most of Your Money

Budgeting: Making the Most of Your Money

Budgeting: Making the Most of Your MoneyUnit 2

Objectives for Unit 2 Budgeting : Making the Most of the MoneyExamine your spending habits.Know the benefits of having a spending plan, or budget.Identify various source of income.Indentify types of expensesKnowing the importance of saving (paying yourself first)Be able to construct a budget.Examine forms of recording involved with budgeting and cash management.Consider how a budget will change throughout your life.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt2Where should all my money go?Money mangers should know what to count on as income. From that spend on the money on bills, and day-to-day purchases. Money is set aside for big expenditures for operations of the company.This unit is to learn to be smart with your money. Where it goes and decide when bills get paid and deal with large expenditures.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt3Did you know?Almost 60% of millionaires use a budget to manage their money.-Millionaire Next Door. Surprising Secrets of America's Wealthy

Page 153How Does Your Spending Measure Up?Review your Spending log from Unit 1What did you learn from your spending habits?Where there any expenditures you regretted?Budget is a plan for managing your money during a period a time.Its not to deprive yourself, but to be able to reach your financial SMART goals.Every business have budgets for everything, payroll, expenditures, capital improvements, inventory, and supplies.Every dollar saved is a dollar to the net profit.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt4

Smart SpendingIn your spending log you have a habit to buy a soft drink on the way home at the convenient store for $1.69. At the end of the month you spent $33.80 or $304.20 for the entire school year (180 days).Could you be smarter with your money?Avoid spending on things you really dont need. This way you have the money for the things you really want. If you received a prize of $50, how will you spend it? Due to values of each person each person will have different ideas to spend it. NEFE High School Fiancial Planning ProgramMr. Dave Schmidt5

Page 165Assignment 2-1 How am I Doing?Compare your spending log from Unit 1 with your financial plan. How well your current spending habits represents your financial goals?If not what type of budget (spending plan) are we going to have to reach your financial goals?What do you think the benefits you will have in having a personal budget?NEFE High School Fiancial Planning ProgramMr. Dave Schmidt6Assignment 2-1ExpensesMatches Goals(Yes or No)Adjustments NeededNEFE High School Fiancial Planning ProgramMr. Dave Schmidt7Part 1 of the Equation: IncomeCash flow: The money coming in as it relates to going out.Income: Money you received for a period of time. Your job, gifts, personal things that you sell.Taxes: payroll deductions to pay for government programs. Local, state, and federal level.Social Security Tax (FICA)Medicare Taxes

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Whats a W-4 For?There is a saying that goes The really certainly in life is death and taxes.The government uses the W-4 form to figure out you financial tax obligations. The following factors deal with the amount of tax you pay:IncomeMarital StatusDependence (children, or other people you financially support)Any other deductions you want to add.

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Part 2 of the Equation: ExpensesExpenses are what you spend money on your needs and wants.Fixed expenses: The same cost each period of time, such as rent, car payments, etc.Variable expenses: fluctuates in amount of usage. These expenses are easier to control, such as utilities, telephone, food, etc.Periodic or occasional expenses: These expenses are not paid every month such as car insurance is paid every 6 months, water and sewage every 3 months, etc.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt10Exercise 2C: What type of Expense Is It?DescriptionFixed?Variable?Periodic?GroceriesPiano lesson feeCable TV billMagazine subscription renewalCar loan paymentNEFE High School Fiancial Planning ProgramMr. Dave Schmidt11Assignment 2-2 My Fixed and Variable ExpensesFixed ExpensesVariable ExpensesPeriodic/Occassional ExpensesNEFE High School Fiancial Planning ProgramMr. Dave Schmidt12Did You Know?The average person spends money three times a day.Putting aside every coin you touch results in saving about $50 a monthA $5 sandwich usually have less than $1 worth of ingredients.If you purchase a soda a day at the store, you can easily spend over $400 a year.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt13The Most Important ExpenseYour financial goal should be the highest of any expense that you have. You are earning the money, you should earn the right to achieve your goals.Pay Yourself first (PYF): Money you put aside for your financial goals (retirement, trips, new car) something that is important to you.Use of Roth IRAs, and other investments that employer can put directly money each paycheck into it. If you dont see it you dont miss it.Set up an emergency fund, to take care of unexpected expenses, such as car repairs, tires, unexpected unemployment.This should be about 6 months of salary.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt14Exercise 2D:Saving to Meet GoalsThe Simpson family wants to buy a new refrigerator for the kitchen. Mr. Simpson has visited several stores and estimates that it will cost $700 to buy and install the type of refrigerator the family wants. The goal is to buy the refrigerator in 6 months. How much do the Simpsons need to save each month?The Mencias want to buy their oldest daughter a computer to take to college next year. Theyve shopped around and think they can get a good desktop computer, software, and a printer for about $1,100. With 15 months to save how much money they need to set aside each month?NEFE High School Fiancial Planning ProgramMr. Dave Schmidt15Exercise 2D:Saving to Meet Goals- Answer$700 6 =

$1,100 15 =NEFE High School Fiancial Planning ProgramMr. Dave Schmidt16$116.67$73.33Assignment 2-3: Saving My GoalsSmart GoalsTotal Amount NeededAmount to Save Each Month or WeekNEFE High School Fiancial Planning ProgramMr. Dave Schmidt17The 411 on Creating a BudgetThe five steps of Financial Planning.Get SMART GoalsAnalyze InformationCreate a PlanImplement the PlanMonitor and Modify the PlanCreating a spending plan or budget works the same way. Your financial goals is instilled in your budget. If you follow your budget you will reach your goalNEFE High School Fiancial Planning ProgramMr. Dave Schmidt18Building a BudgetDecide a time frameList the money received each time period. Total IncomeCategorize your expenses.Total ExpensesBudget Overruns/Shortages.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt19

Assignment 2-4:Build a BudgetPlease read the information about Jessica. Use data provided to outline a personal budget for Jessica.Make sure that Jessicas total expenses dont exceed her total income.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt20

Assessment 2-1My Personal BudgetGo to page 23 of the workbook and complete your personal budget, using Microsoft Excel and use the format as shown before.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt21Keeping TrackCheck bank account statementsSaving and Investment statementsPaystubsTax DeductionsInsurance Statements

Loan and Credit Card StatementsCredit Card FraudReceipts and warranties for big ticket items.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt22

Staying on TrackThe Envelope SystemThe Tally SystemTrack with checking account register,Budget SpreadsheetPersonal Finance Software:QuickBooksPeachtree

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The Living BudgetBudget are not written in stone.Adjustments are made when income increases or decreases.Increases and decreases in your Expenses.Changes in saving goals will be necessary to change your budget.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt24

Exercise 2E: Jessicas Budget Needs AdjustingPage 25 Take Jessicas budget and make the adjustments with the new information provided.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt25

Adding it UpA financial plan makes you personal life easier, because you have a plan on the what you make and you have a plan to spend the money to meet your requirements and goals.It takes the stress out of your life of financial worries.You learned about Paying Yourself First. Make sure that the money you earned reaches to your financial goal.NEFE High School Fiancial Planning ProgramMr. Dave Schmidt26

For more tips , tools, and articles about budgets, visit hafpp.nefe.orgUnit Assessment 2-1My Personal BudgetOn page 26 Using Microsoft Excel prepare your personal budget.Include the following information in your budget:

NEFE High School Fiancial Planning ProgramMr. Dave Schmidt27Anticipated income, savings, and expenses for a month based on your current situation.An explanation of how the budget supports each of your personal goals.GroovLGroovemCopyright 1998, The Microsoft CorporationTony VerderosaVibraphoneAcoustic Grand PianoElectric Bass (finger)Drums pad 7 (halo)

Strings Guitar Bass Drums 7