building: knowledge, security, confidence budgeting

Building: Knowledge, Security, Confidence

Budgeting

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Anticipation Guide

What do you already know?

• Complete the chart by filling-in the pre-reading columns only.

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What is a Budget?

Budgeting is:

• An important step to financial security

• About making smart choices with your money

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Purpose of budgeting

• Learn how to manage money by preparing a personal spending plan

• Identify ways to decrease spending and increase income

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Three Kinds of Goals

• Short-term – within next 2 months

• Medium-term – 2 months to 3 years

• Long-term – beyond 3 years into the future

What are your goals?

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Goal Setting Guidelines

• Be realistic

• Be specific

• Have a time frame

• Say what you want to do

• Have milestones

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Imagine an accident that could happen to you that could result in high financial costs.

If you have insurance, gumballs go into the bowl.

---Without insurance coverage gumballs leave the bowl.

Insurance

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Major Expenses

---The four major expense categories: housing, transportation, food, and taxes.

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Finance Your Dream

• Consider the discussion questions before we view the following clip:

http://www.thirteen.org/finance/about/video2.html

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To make a Budget or to NOT Make a Budget?

It is easier than you think… but it takes work!

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Four Steps to Preparing a Budget

1. Keep track of your daily spending

2. Determine monthly income and expenses

3. Decrease spending

4. Increase income

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Step 1: Keep Track of Daily Spending

Many people spend all their money.

The key is to control your money!

• Know where your money goes• Keep a daily spending diary or log• Cut expenses to save for goals

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Step 2: Determine Income/Expenses

Income comes in the form of:

• Allowances• Wages from a job• Miscellaneous work (like cutting grass)• Interest and dividends from investments

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What You REALLY Earn: Income

• Your employer must subtract certain taxes from your paycheck

• It may take longer to reach your goals

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Gross Income: Total income without deductions

Net Income: Gross income after deductions and other taxes

What You REALLY Earn: Income (continued)

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Take-home pay is less than gross pay

Take-home pay

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Expenses: items you pay for each month

• Housing and car payments

• Insurance• Food and clothing• Utility bills

Step 2: Determine Income/Expenses

• Personal, child or pet care

• Entertainment • School

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Expenses

Two types:

– Fixed

– Variable

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Fixed Expenses do not change• Car payment• Rent

Variable Expenses might change• Electricity• Food• Clothing or entertainment

Expenses (continued)

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Step 3: Find Ways to Decrease Spending

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Spend less than you earn.

• Two ways:1. Spend less

2. Receive more

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• Carrying little cash and controlling your credit card use

• Not shopping “for fun”

• Remembering your savings goals

• Buying only what you need

• Paying your bills on time to avoid extra fees and charges

You can decrease spending by:

Step 3: Find Ways to Decrease Spending

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Step 4: Find Ways to Increase Income

• People receive more by becoming more productive.

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Education and earnings

• Higher pay usually goes along with more education.– Median income by group (2003)

• High school dropout$20,176• High school graduate $27,768• Some college $32,396• College graduate $46,384• Advanced degree holder $57,408

3 volunteers needed

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Our Baseball Draft

• Candidate 1Right field

Bats .120

40-yard dash: 8.0

Fan appeal?

• Candidate 2Center field

Bats .108

40-yard dash: 7.9

Fan appeal?

• Candidate 3Shortstop

Bats .355

40-yard dash: 5.1

Fan appeal?

Who would you choose?

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#1 Draft Pick?

• Decisions depend on productivity.

• Employers want team players who can get the job done.

• More productive = more $$$

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These help you:• Record income in advance• Plan ahead to pay your

bills

Budgeting Tools

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Monthly Payment Calendar

Month________________________________

Sunday Monday Tuesday Wednesday Thursday Friday Saturday

1 2$25 savings$150 car$30 insurance

3$166 school$25 personal

4 5$25 interest (income)

6$30 cell phone

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8 9 10 11 12 13

$400 paycheck14

15 16$40 phone bill

17 18 19 20$10 credit card

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22 23 24 25 26 27$400 paycheck

28$40 concert

29 30

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Help! I Can’t Pay My Bills!

Scenario: You add up your bills and the total is $900, but your income is

only $600….

What would you do?

Think about the bills that would

be the most important!

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Help! I Can’t Pay My Bills! (continued)

If you have to choose, think of major obligations first:

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CONCLUSION: To make a Budget or to NOT Make a Budget?

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Do we really need to budget?

• Clayton and Katrina seem normal…

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Average household spending

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How do you spend your money?

• Do you know?

• Where can you cut back?

• Pay yourself first!

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