Financial Literacy Program Budgeting: It Pays to

Transcript:Financial Literacy Program Budgeting: It Pays to:
Financial Literacy Program Budgeting: It Pays to Plan There are many negative connotations around the term Budget Many people assume that a budget is about deprivation The main goal of a budget is to spend less than you earn The small stuff is what breaks most people’s budgets because they are not aware of small dollar amounts being spent here and there Budgeting: It Pays to Plan Financial experts recommend that you “pay yourself first” by saving It is recommended that you save 20% of your income The more you save at a young age, the longer you have for your investments to work in your favor At a 5% interest rate, if you save just $600 per year starting at age 20 you would accumulate more than $77,000 in interest by the time you reach age 65 Money Management: Break the Spending Habit Keep a Spending Journal for one month to determine your spending habits Write down everything you purchase and keep your receipts Don’t forget to include the small stuff. Small stuff adds up quickly For example, a large fancy coffee drink such as a latte costs around $4.25 a day and well over $1,000 if purchased five days a week for a year. By cutting the latte habit to Mondays and Fridays, you’ll save over $500 per year Money Management: Break the Spending Habit Needs Versus Wants The things we really need in life are limited and include food, shelter, relationships, and clothing Students may want to add tuition and fees, and books and supplies Needs can be satisfied very simply or extravagantly If you can downgrade your standard of living you may be able to graduate with significantly less debt Mark the items on your spending journal as a “want” or “need” It’s okay to buy an occasional “want” but when you are trying to live on a budget, “wants” may be the cause of the biggest leaks in your spending plan Money Management: Break the Spending Habit Set Goals Setting goals and saving diligently for them is the driver of your budget I’m not going to buy a latte today so that I can afford to go somewhere warm for spring break next year Short-term Goals: 6-24 months These are goals that you’ll save actively for in order to meet deadlines like car maintenance or next semester’s tuition Mid-range Goals: 2-5 years These goals may