BBi2O Unit 1: Personal Finance

Table of Contents Unit 1 – Personal Finance 1.A Income Management  Goals, Values  Sources of Income  Uses of Income  Financial Planning  Types of Expenses

Goals, Values Article: “I Wish Someone had Told Me …”“I Wish Someone had Told Me …” Thought Exercise: –In 5 minutes – identify 25 important things to you right now –Step #2 – Listen for directions …

Goal Setting Personal Financial wellness is tied to goal setting. What are your top 3 goals …. Within 1 year? (ie by 16) Within 5 years? (ie by 20) Within 10 years? (ie by 25)   

SOURCES of INCOME

Identify and describe four sources of income i. Employment Income ii. Savings iii. Investments iv. Social Programs

i. Employment Income  Working to earn a paycheque -working for a company or for yourself (entrepreneurship) -paid a “wage” (hourly/salary/commission/bonus) (detailed when we get to our Human Resource unit)  Most popular source of income for most people

ii. Savings Using up money that you had previously put aside By saving, you will earn interest as well (very small amount for a simple bank account)

iii. Investments Giving up your money for a chance to earn more – an investment is something of value that you own – you can earn money by selling the investment or you may earn interest from it. Examples: stocks, bonds, GICs, RRSPs. –(more detail on this in 1.C – Investing )

iv. Social Programs Income from the government to those who cannot work due to illness, layoff, age, etc. Includes social assistance, employment insurance (EI), disability, CPP, OSAP (Ontario Student Assistance Program)

Income Level Factors Important factors of the employee: education, experience, personal performance, uniqueness of abilities Important factors of the job marketplace: type of business, success of business, economic conditions

Income Level Factors i- Education: more education does not necessarily mean you will be earning more money – but it does open the door to more lucrative careers (ex. Lawyers and doctors have high income levels and high education levels) ii- Experience: if you have more experience you are more valuable to a company, less experienced employees need more training which costs the company money

Income Level Factors iii- Personal Performance: employees who do their jobs well add value to a business … they are the ones who will be considered for promotions and raises In a commission based job, the more you sell the more income you will make – the better you are at your job, the more you will earn!

Income Level Factors iv- Uniqueness of Ability: the types of skills and abilities an employee has makes them more or less valuable to a company The more ‘in demand’ a particular skill set is, the higher the level of income. (extreme example – pro athletes, actors, musicians … these jobs have very high pay because they have a highly valued and rare set of skills)

USES of INCOME

WHAT WE MAKE VS. WHAT YOU TAKE HOME Your gross pay is the amount of money you make before any deductions Your net pay is the amount of money you have after deductions are taken off, often referred to as “take-home” pay

uses of INcome The money you have left is called your disposable income. You can then choose any of the following: SPENDING SAVINGS INVESTING DONATING

SPENDING We use money to satisfy our needs and or wants However, some of our money must be spent on certain things. We call these Personal Expenses.

3 types of expenses 1)REGULAR FIXED EXPENSES -Occur on a regular basis (monthly or yearly) and for a constant (predictable) amount. These are often referred to as ‘bills’ and their payment cannot be delayed without penalty. Examples: -Tuition - rent/mortgage - loan repayments -Childcare - insurance - property tax

3 types of expenses 2)REGULAR FLEXIBLE EXPENSES -Occur on a regular basis (monthly or yearly) but for a variable amount. -Also called ‘bills’ and their payment cannot be delayed without penalty. Examples: -Hydro bill- groceries- gas (car) -Income tax - recreation- phone bill

3 types of expenses 3)VARIABLE EXPENSES -Expenses that occur on an irregular basis and for a variable amount. These expenses can be controlled to a certain degree by choosing to postpone them. Examples: -Car repairs- clothing- home repairs -vacations- furniture- restaurants

Budget vs. financial plan A budget is a listing of income and expenses to determine whether income can cover expenses. It does not include a savings goal. A financial plan is a forecast of how much money is needed to achieve a given savings goal.

Mr. Ruston’s #1 FINANCIAL RULE ALWAYS BE SAVING!!

USES OF MONEY #2 SAVING Saving for the long term future (retirement), mid term (college/university), short term (a special school trip) needs to be planned and thought out A minimum of 10% of your income should be saved

USES OF MONEY #3 INVESTING Investing is giving away your money now for a chance to earn more in the future. Popular types of investments include: TFSAs, GICs, RRSPs, RESPs, or buying shares on the stock market

USES OF MONEY #4 DONATIONS Giving money away for what you believe is a good reason (ex. Charities, political parties etc.) The Gov’t even promotes this by giving Donors tax creditstax credits Rick Mercer’s Gift Ideas- Goats! Bednets!

Budget vs. financial plan A budget is a listing of income and expenses to determine whether income can cover expenses. It does not include a savings goal.

Budget vs. financial plan A financial plan is a forecast of how much money is needed to achieve a given savings goal.