Spending PlansAdvanced Level

2.2.5.G1

© Take Charge Today – August 2013 – Spending Plans – Slide 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Where’s My Dough?

What expenses do

you have?

How much do you spend on

each expense?

Play dough = income

Divide your play dough to

show how much is spent

on each expense

Write a personal

financial goal

Based upon your current

spending, is it realistic to

achieve your goal?

Adjust your play dough to

reach your goal

You have begun to develop a spending

plan!

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© Take Charge Today – August 2013 – Spending Plans – Slide 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

What is a Spending Plan?

An income and expense statement sometimes referred to as a budget which records both planned and actual income and expenses over a period of time

A budget

2.2.5.G1

© Take Charge Today – August 2013 – Spending Plans – Slide 4Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Why is a Spending Plan an important part of financial planning?

Analyze the opportunity costs of your trade-offs

to maximize financial well-

being

Helps set and reach goals

Help manage your money in a positive manner

Increase net worth

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© Take Charge Today – August 2013 – Spending Plans – Slide 5Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Money Management Tools

Statement of Financial Position

Income & Expense Statement

Spending Plan

What is my financial position

today?

What is my future money

management plan?

How have I managed my

money in the past?

Make changes

Determine what changes to make

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© Take Charge Today – August 2013 – Spending Plans – Slide 6Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

A forward-looking Income and Expense Statement

May use the same template for both the Income and

Expense Statement and the Spending Plan

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© Take Charge Today – August 2013 – Spending Plans – Slide 7Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Spending Plan Development Process

Step 1 - Track Current Income and

Expense

Step 2 - Personalize Your Spending Plan

Step 3 - Allocate

Money to Each Category

Step 4 - Implement and

Control

Step 5 - Evaluate and Make

AdjustmentsDevelop the spending plan

Maintain the spending plan

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© Take Charge Today – August 2013 – Spending Plans – Slide 8Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Track Current Income and Expenses

Completed by developing an

Income and Expense Statement

Step 1 - Track Current Income and

Expense

Step 2 - Personalize Your Spending Plan

Step 3 - Allocate

Money to Each Category

Step 4 - Implement and

Control

Step 5 - Evaluate and Make

Adjustments

Ensures spending plan is realistic

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© Take Charge Today – August 2013 – Spending Plans – Slide 9Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Personalize Your Spending PlanStep 1 - Track

Current Income and Expense

Step 2 - Personalize Your

Spending Plan

Step 3 - Allocate

Money to Each Category

Step 4 - Implement and

Control

Step 5 - Evaluate and Make

Adjustments

How will you develop a

spending plan?

What is the intended time period for your

spending plan?

What categories will your spending

plan include?

2.2.5.G1

© Take Charge Today – August 2013 – Spending Plans – Slide 10Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

How will you develop a spending plan?

Any written method

that works for you

How would you develop a

spending plan?

Paper and pencil

Spreadsheet

Money management computer software

Applications

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© Take Charge Today – August 2013– Spending Plans – Slide 11Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

What is the intended time period for your spending plan?

What categories will your spending plan include?

•Usually concurrent with pay period

•Reference tracking from the Income and Expense Statement

•Do any categories need added, changed, or removed?

What time period would you choose for your spending

plan?

2.2.5.G1

© Take Charge Today – August 2013 – Spending Plans – Slide 12Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Allocate Money to Each Category

Reference tracking from Step One

Determine what changes to make

Step 1 - Track Current Income and

Expense

Step 2 - Personalize Your Spending Plan

Step 3 - Allocate

Money to Each Category

Step 4 - Implement and

Control

Step 5 - Evaluate and Make

Adjustments

2.2.5.G1

© Take Charge Today – August 2013 – Spending Plans – Slide 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

When allocating money consider:

Contractual Non-contractual

Trade-offs and opportunity

costsGoals Contractual

expenses

Required to pay expense for a specific amount of time - not easy to reduce or eliminate

Easy to reduce or eliminate

Rent, Internet, Cell phone Food, entertainment

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© Take Charge Today – August 2013 – Spending Plans – Slide 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Spending Plan Guide10%

7%

30%

20%

15%

18%

Saving and Investing 10%Insurance 7%Housing 30%Transportation 20%Food 15%Other 18%

What variables may cause these percentages to be different?

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© Take Charge Today – August 2013 – Spending Plans – Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Net Gain or Net Loss?

Income ExpensesNet Gain

or Net Loss

Net Gain? Net Loss?• Add more

money to savings or another expense

• Increase income

• Decrease expenses

• Both

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© Take Charge Today – August 2013 – Spending Plans – Slide 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Implement and Control

Make your planned spending decisions

Step 1 - Track Current Income and

Expense

Step 2 - Personalize Your Spending Plan

Step 3 - Allocate

Money to Each Category

Step 4 - Implement and

Control

Step 5 - Evaluate and Make

Adjustments

Use a control system to stay on track

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© Take Charge Today – August 2013 – Spending Plans – Slide 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Control Systems

Money management computer software

Which control system would

help you stick to your spending

plan?Internet-based spending plan program

Depository institution programs

Check register system

Envelope system

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© Take Charge Today – August 2013 – Spending Plans – Slide 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Evaluate and Make Adjustments

How well did your spending plan

work?

Step 1 - Track Current Income and

Expense

Step 2 - Personalize Your Spending Plan

Step 3 - Allocate

Money to Each Category

Step 4 - Implement and

Control

Step 5 - Evaluate and Make

Adjustments

Is your spending plan helping you

reach goals?

Do you need to make any

adjustments?

2.2.5.G1

© Take Charge Today – August 2013 – Spending Plans – Slide 19Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Summary• A spending plan is an

important financial planning tool▫Helps achieve goals

•Make your spending plan work for you

•Make sure to control, evaluate, and adjust your spending plan

Step 1 - Track Current Income and

Expense

Step 2 - Personalize Your Spending Plan

Step 3 - Allocate

Money to Each Category

Step 4 - Implement and

Control

Step 5 - Evaluate and Make

Adjustments