Budget

How to budget your money?

Some Money Facts

$

The average person spends money three times a day. $ A movie with popcorn and a soft drink can easily cost $20 $ Just one soft drink a day for .99c adds up to $361.35 in a year $ Whats the biggest expense item for teenagers? FOOD!

Money Matters:
How

many times a day do you spend money? The average person spends money 6 times a day. Money brings happiness Money problems bring unhappiness Money problems stay with you for the rest of your life. Top reason for divorce is financial. Finances affects everything else in your life.

Ways to improve your finances

Make

more money Cut your expenses Wait and win the lottery system Have a budget

What is a budget?
A

tool to manage your money For a specific period of time usually monthly Budget due to our limited resources Helps us meet our responsibilities and our financial goals

Reasons for a Budget

Track spending
Money toward expenses/bills
Avoid careless spending Eliminates stress Live within your means/income

Meet financial goals

Save Invest

Puts you in control of your financial future, beginning NOW.

Without a Budget

Have no plan
Paycheck-to-paycheck Come up short Plan for emergencies No savings/investing plans

Less likely to know what $ you have

How to Build a Budget

1. 2.

3. 4. 5. 6.

Decide on a time frame for tracking expenses (monthly) List all money you have coming in (income) A. Disposable income B. Discretionary income PYF (Pay yourself first) = Savings Make categories for all expenses Subtract total expenses from income Study budget and make changes

PAY YOUR$ELF FIRST!

Every time you PYF, you are developing a saving habit that leaves you with more money to spend later on for things that are really important to you! Save 10% of your disposable income each time you get paid

Budgeting Terms
Budget

tool for money management Disposable income after taxes

Discretionary

Expenses:

income after all expenses paid

Fixed expenses monthly contractual Variable expenses not contractual, vary each month Periodic fixed expenses

Spending plan activity

Decide if each item is income, a fixed expense, variable expense or periodic expense

Spending plan activity

Rent

Fixed expense

Wages

Income

Spending plan activity

Groceries

Variable expense

Internet bill

Fixed expense

Spending plan activity

Tips

Income

Utilities

Variable expense

Spending plan activity

Gift from family

Income

Savings

Fixed expense - PYF

Spending plan activity

Automobile registration

Fixed expense

Eating out/Snacks

Variable expense

What is included in a budget for a family in a given month?

The typical family spends their money on: Housing - 30% Transportation - 20% Food -15% Utilities, Home Improvements - 14% Saving - 10% Insurance - 7% Other - 4%

Allocate money to each category

Net gain - $ remaining to either save, spend or invest Net loss - spending more money than 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

Implement and Control

There is not one correct control system. Depends upon the individual/family
Envelope systems individuals place the actual budget amount of cash from a paycheck into a specific envelope system for the expense Check register system 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 like www.mint.com

Net worth statement

A net worth statement describes an individual or familys overall financial condition on a specified date The components include:
Assets Everything a person owns with monetary value Liabilities Debts or what is owed to others Net worth - The amount of money left when liabilities are subtracted from assets (indicates wealth)

Assets

Liabilities

Net Worth

ANY QUESTIONS?