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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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