money management: budgeting - mr. chung u.s. history ...€¦ · money management: budgeting ....
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Money Management: Budgeting
Objectives:
o We will learn the principles
of economy and saving
money for your long term
future.
• (Pro 13:11) Wealth gotten by
vanity shall be diminished:
but he that gathereth by
labour shall increase.
Budgeting 101:
o A budget is simply a plan for
spending and saving.
o Eight to 24 year olds are ready to spend money in 2012. Two hundred eleven billion dollars, to be more precise. According to the 2012 Harris Poll YouthPulse(SM) study, the purchasing power of today's youth is something that should not be overshadowed by the spending power of adults. Over half of eight to 12 year olds will spend their own money on candy (61%) and toys (55%) while a quarter will buy books (28%) and one-in-five will purchase clothing (19%). Teens, those 13-17, still crave candy, and half (51%) will make a point of treating themselves to sweets. However, clothing (42%) and entertainment, like movie tickets (33%) have become bigger priorities for this older group. NEW YORK, Oct. 26, 2011 /PRNewswire/
Make an Assessment:
(1) How much money did you spend on beverages-from boba, coffee, or water to energy drinks?
(2) How much money will you spend on gas next week?
(3) How long will it take you to save for the most expensive thing you would like to buy?
Make an Assessment:
o A Balancing Act: Budgeting is a
balancing act between income
and expenses.
o It also means weighing your
needs against your wants.
Income and Expenses:
1. (Make a list of your earnings per month from all sources. Add these up to calculate your expected monthly income.
2. For one month keep a record of everything you spend, from chewing gum to car payments. Collect receipts or write everything in a notebook. Make sure you don’t leave anything out, and that includes savings.
3. At the end of the month, organize your spending into categories such as food, entertainment, and car payments. Total amount in each category.
4. (On a sheet of paper list your income and expenses.
Income and Expenses:
o If your total expenses are less
than your total income, you are
doing fine.
o If not, you need to take a hard
look at where your money is
going.
Needs and Wants:
o Determine what is absolutely necessary and what is absolutely unnecessary.
o Live within your means and try to save a set percentage of your income.
o Some budget counselors suggest allotting 80 percent for needs.
o 10 percent for wants, and 10 percent for savings.
Waste not your pennies and your shillings in purchasing unnecessary things. You may think these little sums do not amount to much, but these many littles will prove a great whole. If we could, we would plead for the means that is spent in needless things, in dress and selfish indulgence. Poverty in every shape is on every hand. And God has made it our duty to relieve suffering humanity in every way possible. {AH 383.2}
Budget boosters
(1) Keep a spending journal for one week.
(2) Identify needs: bills, car payment, etc.
(3) Downsize or eliminate impulse to buy such as coffee, boba, and soda.
(4) Making saving a priority and a habit
(5) Add to your savings weekly, even if just a small amount.
Budget boosters
(6) Identify a long term want to start saving for it.
(7) PRIORITIZE and pay down any outstanding debt.
(8) Use cash for daily spending
(9) During vacations or summer, pick up some extra hours at work
(10) Live within your means, Spend less than you make.
Checking Account:
o You want to use a bank that is
insured by the Federal Deposit
Insurance Corporation (FDIC),
o It protects your money in case
you bank fails to up to $250,000.
Pick the Right Services.
o There might be hidden fees or charges per month.
o Be careful.
o You can keep track either by checking your account online or using a checkbook.
o After writing a check make sure to subtract that amount to your balance (Your total funds in the account).
Pick the Right Services.
o Online checking is convenient where you can transfer funds and make credit card payments without mailing a check.
o A debit card is issued with a credit card logo but the difference is that it is deducted from your checking account balance.
o It can also be used as an ATM card but if you withdraw from a bank other than your own you will be charged.
Saving for the Long Haul:
o Give to God first.
o Tithe 10 percent of your income to His church and He will bless you.
o (Mal 3:10) Bring ye all the tithes into the storehouse, that there may be meat in mine house, and prove me now herewith, saith the LORD of hosts, if I will not open you the windows of heaven, and pour you out a blessing, that there shall not be room enough to receive it.
Saving for the Long Haul:
o Then pay yourself. It means to make personal savings a regular part of your budget just like rent and food.
o If you cut out the daily $2.00 for soft drinks at the vending machine, you’ve just saved $14 a week.
o Multiply that by 52 and you pocketed a tidy sum in just one year.
o Saving is a habit and takes discipline.
Benefits of Saving Accounts:
o The earlier you start saving, the faster your money will grow.
o The reason: compound interest.
o Compound interest is interest you earn, not only on the money you put into an account, but also on all the interest you previously built up.
o Today’s interest earnings will start earning interest tomorrow.
Benefits of Saving Accounts:
o The more you save today, the more interest you will gain tomorrow.
o And that saving will add up to a faster rate.
o Other benefits: Saving your money in an Individual Retirement Account (IRA) the money may escape taxation until you retire or at least you reach 59 ½.
o That cuts your tax bill.
o Even better, when you withdraw your money from a special IRA, the money you make the appreciation may not be taxed at all.
Benefits of Saving Accounts:
o Finally, putting money away now
allows you to have a cushion in
case of emergencies.
o There are even circumstances,
despite governments restrictions,
where you can dip into retirement
funds to pay for other expenses
like your first house or to pay for
high medical bills.
The amount daily spent in
needless things, with the
thought, "It is only a nickel," "It
is only a dime," seems very
little; but multiply these littles by
the days of the year, and as the
years go by, the array of figures
will seem almost incredible.
{AH 384.1}
Every week you should lay by in
some secure place five or ten
dollars not to be used up unless
in case of sickness. With
economy you may place
something at interest. With wise
management you can save
something after paying your
debts. {AH 396.2}
I have known a family receiving twenty dollars a week to spend every penny of this amount, while another family of the same size, receiving but twelve dollars a week, laid aside one or two dollars a week, managing to do this by refraining from purchasing things which seemed to be necessary but which could be dispensed with. {AH 396.3}
Savings Account:
o Usually, saving starts with setting up a basic saving account carrying no monthly fee.
o Do your research.
o Make sure the bank will not charge your excessive fees just for the privilege of having your money.
Savings Account:
o CDs or a certificate of deposit like a savings account but CD is insured and therefore very low risk.
o But CD’s generally offer higher interest than a savings account.
o The catch is once you put your money in; you can’t take it out for a fixed period of time.
Savings Account:
o Depending on the length of the
CD, you would have to part
company with your money for
as little as three months or as
long as five years.
o There are penalty fees for early
with-drawls.
Savings Account:
o Money Markets: What if you want higher yield, than a regular savings account without tying up your money?
o Money market account.
o This is a type of the savings account with a high yield that allows you to write checks as long as you maintain a high balance in the account.
Money Management: Borrowing
Objectives:
o We will learn about credit,
debt payments and college
loans.
• Pro_22:7 The rich ruleth over
the poor, and the borrower is
servant to the lender.
Fundamentals of Good Credit:
o The most important step is
simple: pay your bills on
time, every late or missed
payment will end up on your
credit report.
o Pay your credit card bills in
full.
Fundamentals of Good Credit:
o Credit allows lenders to approve you quickly in the event you seek to borrow money.
o It is based on a credit report where your financial report card details your payment history and details of your bank and credit card accounts.
o Lenders can see how much debt you are already carrying, they can also see if you have any bankruptcies or judgments against you or if you owe back taxes.
Credit cards are dangerous.
o Americans in 2011 owe $54 billion
collectively according to Time
Magazine.
o You should pay off your credit card
monthly but if you don’t you’ll pay
interest the following month called
the annual percentage rate even
though you pay a minimum.
o Cash back options.
• Many, very many, have not so educated themselves that they can keep their expenditures within the limit of their income. They do not learn to adapt themselves to circumstances, and they borrow and borrow again and again and become overwhelmed in debt, and consequently they become discouraged and disheartened. {AH 374.2}
• The lessons of Jesus Christ are to be carried into every phase of practical life. Economy is to be practiced in all things. Gather up the fragments, that nothing be lost. There is a religion that does not touch the heart and therefore becomes a form of words. It is not brought into practical life. Religious duty and the highest human prudence in business lines must be co-mingled. {AH 381.2}
Loans:
o Loans come in several forms.
o Single-payment loans are short terms loans paid off in one lump sum.
o Installment loans, such as home mortgage or auto loans are repaid at regularly scheduled intervals.
o Each payment is divided between principle, or the amount borrowed and interest.
Loans:
o A third kind of debt is revolving
credit where the amount
borrowed and paid changes
each month.
o Debts: Some debts may be
necessary temporarily (e.g.,
home mortgage etc.)
Loans:
o Here are some warning signs for credit
o Inability to make minimum payments.
o Relying on credit cards out of necessity and not of convenience.
o Borrowing from one credit card in order to pay for another.
o Tapping retirement savings or other investments to pay loans.
o You want to avoid bankruptcy.
• Be determined never to incur
another debt. Deny yourself a
thousand things rather than
run in debt. This has been the
curse of your life, getting into
debt. Avoid it as you would
the smallpox. {AH 393.4
Insurance Basics Part I,
o Insurance is part of a risk management plan that will protect you against financial losses.
o Basically, insurance is a bet between you and your insurer.
o You are betting that something bad will happen to you such as illness or a car accident.
o The company is betting against it.
Insurance Basics Part I: Auto
o It protects you and other drivers in
case of an accident that results in
damage and injury.
o It also protects you in case of theft,
vandalism, and natural disasters.
o Most states require you to have
your own auto insurance or to be
listed as a driver on someone
else’s policy.
Insurance Basics Part I: Health
o Protects you in case of illness or
injury.
o It also covers the cost of routine
medical and preventive care
prescriptions.
o And in some cases dental care.
Insurance Basics Part I: Property
o Protects your home or apartment in case of damage or loss of your belongings due to fire or natural disasters.
o It can cover your liability if someone is injured in your home and sues you for damages.
o Most policies do not however protect you against flood damage.
o You need to buy that coverage separately.
Insurance Basics Part I: Life Insurance
o Pays a set amount to your
beneficiary in case of your
death.
o The beneficiary is the person or
entity, such as a charity, that you
name is the recipient of the
death benefit of your life
insurance policy.
Insurance Basics Part I: What It Costs
o The payment you make to an insurance company is called a premium.
o The cost of insurance is high and getting higher.
o In many cases, insurance is not optional.
o You can’t even register a car without proof of auto insurance.
Insurance Basics Part I: Deductibles
o Insurance companies spread out
their risk by collecting premiums
from a lot of customers.
o They also reduce their costs by
requiring co-pays and deductibles.
o A deductible is an amount you
have to pay before your coverage
kicks in.
Insurance Basics Part I,
o If your car insurance policy has a $1,000 deductible, and you are in a accident, you will have to pay the first $1,000 in damages the company pays the rest.
o The higher the deductible the lower the premium.
o Co-Pays: If you have a co-pay you are responsible for small portion of the total cost of a service covered by your insurance policy.
o Every time you go to a doctor you might have to pay a relatively small amount of the bill and your insurance company pays the rest.
Insurance Basics Part I: Saving Money on Insurance
o Shop around for the best deal
o Make yourself a better risk.
o Insurers reward behaviors that lower
risk.
o A healthy lifestyle and a good driving
record can keep costs in check.
o Good grades can get you a discount
on car insurance.
• You might today have had a capital of means to use in case of emergency and to aid the cause of God, if you had economized as you should. Every week a portion of your wages should be reserved and in no case touched unless suffering actual want, or to render back to the Giver in offerings to God. . . . {AH 395.3}
• The means you have earned has not been wisely and economically expended so as to leave a margin should you be sick and your family deprived of the means you bring to sustain them. Your family should have something to rely upon if you should be brought into straitened places. {AH 396.1}
Renting an Apartment: Can I Afford It?
o A general rule of thumb is that your rent and utility payments should not cost more than one weeks take-home pay.
o How can you figure the average monthly cost of utilities?
o Ask the landlord or the previous tenant.
o You may also have to pay a security deposit.
o This money is set aside for repairs of any damage you may do to the payment beyond normal wear and tear.
o Roommates can help split the costs.
Renting an Apartment: Furnishings
o If you rent a unfurnished apartment,
then you will have to get the best
deals as possible from second
hand sources.
Renting an Apartment: Protect Yourself
o You as a tenant or lessee and the property owner as landlord or lessor enter into a contract called a lease or rental agreement.
o You will need your documents you will need to provide.
o These items include proof of income and identity, letters of reference, and check for any required deposit.
o Get the lease in writing.
o If you don’t understand something don’t sign it.
o Renters insurance is advisable.
Renting an Apartment: Rights and Responsibilities
o This is your money and your home and you have rights.
o You have the right to privacy.
o A landlord or maintenance worker is prohibited from entering your apartment without your permission.
o Renter’s rights and responsibilities vary according to location but most states provide a tenant-landlord bill of rights.
o Tenants have responsibilities such as paying the rent on time and keeping the apartment clean.
Renting an Apartment: Also Consider
o How long is the term of the lease?
o When is the rent due?
o What are the penalties of paying late?
o Are utilities included in the rent?
o Are there working smoke detectors?
o Is parking available?
o Is the neighborhood safe?
o Is there public transportation nearby?
o Are there laundry facilities?
o Is it clean?
Renting an Apartment:
o Are pets allowed?
o How much advance notice is required before moving?
o What happens if you break the lease?
o How are repairs handled?
o Can you make cosmetic changes such as painting or hanging pictures?
College: o Is it for you?
o Pray and ask God to reveal His will.
o God reveals His will for your life: (Psalms 40:8, 1 John 5:14-15, 1 Timothy 2:4)
o Through His word (The Bible (John 17:17, 2 Timothy 3:16-17)
o Impressions upon the heart
o And providence.
Paying for College: Choose Carefully
o Average cost of tuition at public and private universities nearly doubled.
o In 2014, the price of public education will cost over $125,000 for incoming freshman.
o The cost at a private university will be almost twice the amount.
o What school do you want to attend or why?
o Examine your goals, look for the educational resources you need at less expensive public schools.
Paying for College:
o Does location matter? Varies from
region to region.
o How much debt can you tolerate?
o If your career goal is to be a
freelance artist rather than a brain
surgeon, you might want to choose
the less expensive college to cut
down on your post-graduation debt.
Paying for College: Financial Aid Basics
(1) Grants and scholarships
(2) Work-study programs
(3) Loans.
o The idea is to reduce the
amount you are going to owe
by applying for as many
sources of aid as possible.
Types of Lenders:
o When it comes to government
aid, the department of Education
offer three basic loans.
o Direct loans and Stafford Loans
for parents or students as well as
the Parent Loan for
Undergraduate Students (PLUS).
Types of Lenders:
o For those in financial need, there is the Federal Perkins Loan.
o These loans have a fixed interest rate and are made available through the college.
o Students who go on to take teaching jobs in certain areas or who volunteer in humanitarian organizations may be eligible to have their federal loans partially repaid or even canceled.
Types of Lenders:
o To help qualifying graduates
the government limits loan
payments to 10 percent of
their discretionary income.
o Any person who makes their
payment on time will have the
balance forgiven after 20
years.
Private Sources:
o If money from the government
loans does not cover all your
college expenses, private lending
sources could fill the gap.
o Compared to government loans,
regular commercial loans typically
have higher interest rates, fees,
and credit requirements.
Other Sources: (Grants)
o A no strings attached grant is a no-brainer to consider when applying for financial aid.
o Available from the federal government, state government, and higher education institution grants are usually awarded according to financial need and tuition rates.
Other Sources:
o Don’t forget FAFSA also known as the Free Application and Federal Student Aid.
o Students should complete the FAFSA even if they believe they will not qualify for aid.
o You need to complete this form if you want to be considered for federal aid, such as the Pell Grant and Supplemental Education Opportunity Grant.
o These grants are given to students with exceptional financial need.
Other Sources: Scholarships and Work Study
o Besides aid from the school
itself, there are scholarships
available from local community
and civic groups.
o This type of aid allows students
to earn money to offset their
educational expenses.
