Budgeting: Making the Most of Your Money - PowerPoint Presentation

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Budgeting: Making the Most of Your Money

Unit 2Slide2

Objectives for Unit 2

Budgeting : Making the Most of the Money

Examine your spending habits.Know the benefits of having a spending plan, or budget.Identify various source of income.

Indentify types of expenses

Knowing the importance of saving (paying yourself first)

Be able to construct a budget.Examine forms of recording involved with budgeting and cash management.Consider how a budget will change throughout your life.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

2Slide3

Where should all my money go?

Money mangers should know what to count on as income. From that spend on the money on bills, and day-to-day purchases. Money is set aside for big expenditures for operations of the company.

This unit is to learn to be smart with your money. Where it goes and decide when bills get paid and deal with large expenditures.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

3

Did you know?

Almost 60% of millionaires use a budget to manage their money.

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Millionaire Next Door. Surprising Secrets of America's WealthySlide4

How Does Your Spending Measure Up?

Review your Spending log from Unit 1

What did you learn from your spending habits?Where there any expenditures you regretted?Budget is a plan for managing your money during a period a time.Its not to deprive yourself, but to be able to reach your financial “SMART” goals.

Every business have budgets for everything, payroll, expenditures, capital improvements, inventory, and supplies.

“Every dollar saved is a dollar to the net profit.”

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

4Slide5

Smart Spending

In your spending log you have a habit to buy a soft drink on the way home at the convenient store for $1.69.

At the end of the month you spent $33.80 or $304.20 for the entire school year (180 days).Could you be smarter with your money?Avoid spending on things you really don’t need. This way you have the money for the things you really want.

If you received a prize of $50, how will you spend it? Due to values of each person each person will have different ideas to spend it.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

5Slide6

Assignment 2-1 How am I Doing?

Compare your spending log from Unit 1 with your financial plan. How well your current spending habits represents your financial goals?

If not what type of budget (spending plan) are we going to have to reach your financial goals?What do you think the benefits you will have in having a personal budget?

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

6Slide7

Assignment 2-1

Expenses

Matches Goals

(Yes or No)

Adjustments Needed

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

7Slide8

Part 1 of the Equation: Income

Cash flow: The money coming in as it relates to going out.

Income: Money you received for a period of time. Your job, gifts, personal things that you sell.Taxes: payroll deductions to pay for government programs. Local, state, and federal level.Social Security Tax (FICA)Medicare Taxes

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

8Slide9

What’s a W-4 For?

There is a saying that goes “The really certainly in life is death and taxes.”

The government uses the W-4 form to figure out you financial tax obligations. The following factors deal with the amount of tax you pay:IncomeMarital StatusDependence (children, or other people you financially support)

Any other deductions you want to add.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

9Slide10

Part 2 of the Equation: Expenses

Expenses are what you spend money on your needs and wants.

Fixed expenses: The same cost each period of time, such as rent, car payments, etc.

Variable expenses

: fluctuates in amount of usage. These expenses are easier to control, such as utilities, telephone, food, etc.

Periodic or occasional expenses: These expenses are not paid every month such as car insurance is paid every 6 months, water and sewage every 3 months, etc.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

10Slide11

Exercise 2C: What type of Expense Is It?

Description

Fixed?

Variable?

Periodic?

Groceries

Piano lesson fee

Cable TV bill

Magazine subscription renewal

Car loan payment

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

11Slide12

Assignment 2-2

My Fixed and Variable Expenses

Fixed Expenses

Variable Expenses

Periodic/

Occassional

Expenses

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

12Slide13

Did You Know?

The average person spends money three times a day.Putting aside every coin you touch results in saving about $50 a month

A $5 sandwich usually have less than $1 worth of ingredients.If you purchase a soda a day at the store, you can easily spend over $400 a year.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

13Slide14

The Most Important Expense

Your financial goal should be the highest of any expense that you have. You are earning the money, you should earn the right to achieve your goals.

“Pay Yourself first” (PYF): Money you put aside for your financial goals (retirement, trips, new car) something that is important to you.Use of Roth IRAs, and other investments that employer can put directly money each paycheck into it.

If you don’t see it you don’t miss it.

Set up an emergency fund, to take care of unexpected expenses, such as car repairs, tires, unexpected unemployment.

This should be about 6 months of salary.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

14Slide15

Exercise 2D:

Saving to Meet Goals

The Simpson family wants to buy a new refrigerator for the kitchen. Mr. Simpson has visited several stores and estimates that it will cost $700 to buy and install the type of refrigerator the family wants. The goal is to buy the refrigerator in 6 months. How much do the Simpsons need to save each month?The

Mencias

want to buy their oldest daughter a computer to take to college next year. They’ve shopped around and think they can get a good desktop computer, software, and a printer for about $1,100. With 15 months to save how much money they need to set aside each month?

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

15Slide16

Exercise 2D:

Saving to Meet Goals- Answer

$700 ÷ 6 =$1,100 ÷ 15 =

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

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$116.67

$73.33Slide17

Assignment 2-3: Saving My Goals

Smart Goals

Total Amount

Needed

Amount

to Save Each Month or Week

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

17Slide18

The 411 on Creating a Budget

The five steps of Financial Planning.

Get SMART GoalsAnalyze InformationCreate a PlanImplement the PlanMonitor and Modify the Plan

Creating a spending plan or budget works the same way. Your financial goals is instilled in your budget. If you follow your budget you will reach your goal

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

18Slide19

Building a Budget

Decide a time frame

List the money received each time period. Total IncomeCategorize your expenses.Total ExpensesBudget Overruns/Shortages.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

19Slide20

Assignment 2-4:

Build a Budget

Please read the information about Jessica. Use data provided to outline a personal budget for Jessica.Make sure that Jessica’s total expenses don’t exceed her total income.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

20Slide21

Assessment 2-1

My Personal Budget

Go to page 23 of the workbook and complete your personal budget, using Microsoft Excel and use the format as shown before.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

21Slide22

Keeping Track

Check bank account statements

Saving and Investment statementsPaystubsTax DeductionsInsurance Statements

Loan and Credit Card Statements

Credit Card Fraud

Receipts and warranties for big ticket items.NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

22Slide23

Staying on Track

The Envelope SystemThe Tally System

Track with checking account register,Budget SpreadsheetPersonal Finance Software:QuickBooksPeachtree

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

23Slide24

The Living Budget

Budget are not written in stone.

Adjustments are made when income increases or decreases.Increases and decreases in your Expenses.Changes in saving goals will be necessary to change your budget.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

24Slide25

Exercise 2E:

Jessica’s Budget Needs Adjusting

Page 25 Take Jessica’s budget and make the adjustments with the new information provided.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

25Slide26

Adding it Up

A financial plan makes you personal life easier, because you have a plan on the what you make and you have a plan to spend the money to meet your requirements and goals.

It takes the stress out of your life of financial worries.You learned about Paying Yourself First. Make sure that the money you earned reaches to your financial goal.

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

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For more tips , tools, and articles about budgets, visit hafpp.nefe.orgSlide27

Unit Assessment 2-1

My Personal Budget

On page 26 Using Microsoft Excel prepare your personal budget.Include the following information in your budget:

NEFE High School Fiancial Planning Program

Mr. Dave Schmidt

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Anticipated income, savings, and expenses for a month based on your current situation.

An explanation of how the budget supports each of your personal goals.