Chapter 6: Budgeting. Chapter 6.1 Choose Financial Goals.

Chapter 6: Budgeting

Chapter 6.1 Choose Financial Goals

• Read each question on the Cosmo Quiz.

• Total up your answers• Determine how you manage your

money!

Cosmo Quiz

Cosmo Quiz Scoring1. a. 5 b. 1 c. 3

2. a. 1 b. 3 c. 5

3. a. 3 b. 1 c. 5

4. a. 5 b. 1 c. 3

5. a. 1 b. 5 c. 3

6. a. 5 b. 3 c. 1

7. a. 5 b. 3 c. 1

8. a. 3 b. 1 c. 5

Scoring Results• 10 – 20 points

You tend to be a bit overcautious with money. You don’t mismanage your money, but you’re not being fair to yourself either. You should treat yourself to something special.

• 21 – 30 pointsYou manage your money wisely. When you receive money, you know exactly what to do with it. You save some of your money and leave some left over for yourself.

• 31 – 40 pointsYou tend to be a bit careless when it comes to managing money. Money burns a hole in your pocket. You need to learn to be a little more conservative with the money you receive. You will soon find that your finances will fall into place.

• Write down 3 short term spending goals you have (within 6 mo- yr)

• Write down 3 long term spending goals you have (1 yr-more)

Bell Ringer 1

• A plan for dividing income among spending and saving options.

• It can help you achieve more of what is important to you during your life span.

Budget

• First step in budgeting process is to consider important goals you have set in your life-span plan

First Step in Budget Process..

• Short term– Things you hope to achieve within a year– Spending $200 to visit a friend who moved

away– Can be achieved quickly

• Long Term– Things you want to achieve over more than a

year– Pay for a house, college, retirement, etc.– Saving over time

Short Term Vs. Long Term Goals

• Control short term spending• Saving NOW!!• Spending to satisfy short term wants

can affect your future plans• Evaluate priorities

Balancing Long Term Spending with Long Term Success

• Your actions affect you and your family

• Consider how your goals impact other people in your life.

Your Goals Affect Others

• Your Current Family– You have a goal of being a computer

programmer– Paying for this degree requires a lot of

money for your education– Most parent help out in getting loans to help

their children– It can take many years to pay off the loan– How might this financial burden affect

your lives?

Your Goals Affect Others

• Future Family– 75% of people marry before 30 yrs old– Your decisions now or in the next few

years can affect the person you marry– By borrowing you trade future spending

for current spending– Borrow Responsibly!

Your Goals Affect Others

• You go to school• Get a job• Earn money• Start a family

• The work you choose to do can benefit many people in your community!

Your Community and Your Goals

Chapter 6.2: Track Income and Expenses

• Money you receive in the form of:– Paycheck– Cash– Gifts– Tips

Income

• Items you spend your income on– Cell phone bill– Rent– Groceries– Cable/Internet

• Income

Expenses

• Labeled file folders– File receipts, check stubs, and notes

about income or purchases

• Computer spreadsheet• Keep spending organized so you can

plan for vacations, major purchases, and long term expenses

Filing System

• File each record as you receive it– File folder or computer spreadsheet

• Keep all your records in files and all your files in one place!

Record Keeping

• Amounts you are committed to spend and are generally the same amount each month.– Rent/mortgage– Cell phone bill– Cable bill– Car payment

Fixed Expense

• Varies month by month• Amounts you can choose to spend or

not to spend– Clothing– Groceries– Entertainment: movies, concerts,

restaurants

Flexible Expenses

• Goods that have special qualities that make them more expensive then alternative goods.– Sports car vs. A used compact car– (Lexus vs. Toyota)– Coach purse vs. Purse from Kohls

• You must choose among flexible spending options. Prioritize your options!

Luxury Goods

• List your income and expenses

• This tracks where your money goes

• You can use excel as a starting point!

2nd step of budget process

• Advantage– You know how much you have to pay

when you have to pay it!

Fixed Expenses

• Open your Life Smart Project to Page 3

• Underneath your bell ringer, write down your monthly net pay from your life smart project (found on tax page 3).

• Multiply this amount by 15%

• This is your food budget!

Food Budget

• List 2 reasons why it is important to budget your expenses.

Bell Ringer 2

Vacation Budget Project

• Work on the short and long term financial goals tab of your Life-Smart Project– Choose 1 item you want to buy short term

• Search 2 places you can buy this item at• Research Pricing

– Choose 1 item you want to buy long term• Search 2 places you can buy this item at• Research Pricing

03/18/13

• Budget Episode

Cosby Show

–Read “How to Squeeze A Nickel” article–Complete the answer sheet

Bell Ringer 3

Chapter 6.3: Your Budget Worksheet

• A planning document on which you record your expected and actual income and spending over a short time, usually a month.

Budget Worksheet

• Sources of income– Expected Amount– Actual Amount– Over or Under

• Fixed Expenses• Flexible Expenses• Savings

Information on Budget Worksheet

• 1. Create a worksheet• 2. Estimate your income– Use NET income!– Estimate uneven income (tips, gifts,

varied income)

5 steps in building a budget

• 3. Estimate Your Expenses and Savings– Plan for uneven expenses • Car insurance, property tax, etc.

– Charitable Giving– Plan your savings• You should save 10% of your Net Pay each

month!• Try not to spend this amount!!

5 steps in building a budget

• 4. Record Actual Income and Expenses– As you spend money, write it down! – Make sure you are also filing receipts in your

file box!

• 5. Calculate the difference– Subtract expected amounts from the actual

amount in each row.– In the over under column, record the

difference

5 steps in building a budget

Chapter 6.4: Create your budget for the year

• Checking your budget for accuracy and to determine whether it is helping you to achieve your goals

Audit

• Can help you plan steps toward major goals that may take many years to achieve– House, retirement, college, etc.

Review Your Budget Once a Year

• People change overtime• Your goals may be different in 5

years• When your goals change, your

budget should change• A budget is a flexible tool to help you

achieve what you want!

Review to Change Goals

• Find a computer and Log on!• Go to the J Drive Watson Consumer

Ed Peapod Activity– 1. Think of meals you eat during the week

for breakfast lunch and deal– 2. Make a meal plan for 7 days– 3. Start making a list of all the ingredients

you will need– 4. Use www.peapod.com to find your items

and determine prices

Peapod Activity

• Store Brand Vs. Generic- Extreme Couponing

• Consumer Report Video• Consumer Report 1• Taste Test

Store Brand vs. Name Brand

• A. Fixed Expense• B. Long-term• C. Life-Span• D. Flexible Expense• E. Short-Term• AB. Long-term Goal• AC. Wants• AD. Needs

Questions 21-24 Word Bank