B UDGETING

L EARNING O UTCOMES Section 1: Budgeting 101 Section 2: The Basics of Banking Section 3: The Importance of Having a Zero Based Budget

S ECTION 1

C ASH F LOW P LANNING A simple written plan can actually give you more money to enjoy Money is Active It’s moving all the time. If you don’t make it behave for you, you’ll wonder where it went. You must do a written Cash Flow Plan (Budget) Every Month Budget is the blueprint for building wealth. Must have a Game Plan

F OUR R EASONS P EOPLE A VOID B UDGETS 1. Straight Jacket Connotation Believe that having a budget will constrict them and keep them from doing what they want to do. Reality = Managed money goes further and gives you freedom. 2. Budget has been used to Abuse them. Constantly hearing “It’s not in the Budget” Intention is to spend less than you make – NOT to take all the fun out of your life. 3. Never had a budget that worked. Don’t expect to write a perfect budget on your first try. You will make mistakes 4. Paralysis by Fear Some people are afraid to look at their finances closely It’s better to face bills/debts proactively Ignoring financial distress only makes the problem bigger.

S ECTION 2

R ESPONSIBLE B ANKING Managing your Money will involve banking. Once you establish cash flow (job or parents) – You should open a checking account. Consider your checking account as your spend account. Keep Savings/Emergency Fund Separate

L EARN TO K EEP YOUR C HECKING A CCOUNT B ALANCED You must keep your checking account balanced. Keeping an accurate balance of your account will help you avoid frequent & costly mistakes. Overdraft : can cost you $35 each time for a bounced check. Overdrafts are a sign of crisis living and sloppy, lazy money habits. Managing money is a sign of maturity. Your online statement may not reflect unprocessed checks. If not managed and made to behave, a debit card, can become a budget buster. Swiping your debit card is simply like writing a check. You must record your spending.

B ALANCING Y OUR C HECKBOOK What You’ll Need 1. Your Check Register or Smartphone Budgeting app 2. Your Last Bank Statem ent or Online Account Summary 3. A Reconciliation Sheet. Things to Remember If you’re diligent with recording transactions in your check register every time money is spent, your register has the most current balance Account balance from the bank statement/ATM is not as current as your register’s balance because they don’t account for transactions that haven’t gone through, yet. Contact the bank if you think they made an error. Don’t be discouraged the first few tries. It TAKES practice.

B ALANCING Y OUR C HECKBOOK How to Do It 1. Write Down every deposit & withdrawal throughout the month in your register. 2. Each time you make an entry in your register add/subtract for a current balance. 3. Record any interest accrual and bank fees in your register when you receive your bank statement. Compare Check Register to Bank Statement Side by Side 1. Compare each transaction one by one. 2. On the reconciliation sheet – list any debits or deposits that are present on your register, but not the bank statement. Calculate into the bank statement 3. Compare your register balance to the statement. They SHOULD be the SAME. If not, look for any outstanding checks or unrecorded bank fees/transactions or bank errors.

K EEP R ECORDS Smart Money Managers develop a filing system for keeping and using financial records. Maintain both paper and electronic files for reference. These records will be useful for filing taxes and for disputing bank errors or fraudulent purchases. You may want to check with your bank to find out what online record keeping features they offer. In the digital age, its easy to personalize a system that works for you. Explore phone apps and software that may help in many areas of personal finance like budgeting, saving, and keeping records.

B ANKING T OOLS Writing Checks Can be used to pay bills Allow you to pay things without carry large amounts of cash. Most stores will want some basic personal information when using a check/debit card. Online Bill Pay Allows you to make payments without having to write a check and send it in the mail. Cans specify who you want to pay and for how much. Use electronic transfer or mail a check through the bank. Use repeat and automatic payments.

B ANKING T OOLS Debit Card Purchases (In Store/Online) Withdraws money from your checking account. Select “Credit” option instead of “Debit” when making a store purchase b/c it protects your card by the company’s zero-liability policy You won’t be responsible for any unauthorized transactions. Memorize your PIN – don’t carry it around with you. Account Transfers Allow you to move money between your accounts. Set up weekly or monthly automatic drafts from checking to savings. Easiest way to build savings for emergency fund and large purchases.

B ANKING T OOLS ATM Allows you to make withdrawals, deposits, or transfers without entering the bank. Your bank typically does not charge you a fee, but using another bank may cost a fee. Can use banking online app (new technology) Mobile Banking Takes a lot of features of online banking and brings it to your smartphone. Give text alerts & text banking. Will vary from Bank to Bank

S ECTION 3

C HAS F LOW P LANS D O N OT W ORK W HEN You leave things Out Make sure you budget for EVERYTHING that requires money. You Overcomplicate your Plan It’s as simple as writing everything down that requires money each month and putting an amount next to it. You don’t actually do it. Easy to find reasons not to WRTIE down your budget. You don’t actually live on it. It will NOT work unless you follow it. Adjust if things aren’t working until you get it right.

R EASONS FOR D OING A B UDGET Removes “management by crisis” 70% of Americans are living paycheck to paycheck Just one missed payday away from a disaster Managed money goes further You’re accounting for every single dollar of your income. You cut out all of those little expenses that fly into your wallet

M ONEY A FFECTS R ELATIONSHIPS #1 cause of fights in marriages Typically disagreements over debt & the stress that debt brings Not agreeing on where to spend the money you make A written plan – if used – will remove many of the money fights in a relationship Guilt, shame, and fear that may be a part of buying necessities Remove many of the overdrafts and stress Will show if you are overspending in certain areas.

Z ERO B ASED B UDGET Gives every dollar a name on paper, on purpose, BEFORE the month begins Best method since it ensures every dollar is assigned a specific purpose. Money is wasted when not directed towards a goal Income minus Outgo = ZERO Put every dollar to work for you. Envelope System Works great for managing spending on things that don’t normally have a fixed monthly expense. Decide how much you have to spend and place that amount in an envelope When that envelope is empty – you are done for the month Ex: Clothes, Eating out, Entertainment

D ISCUSSION Q UESTIONS : 1. In what way is money active? 2. Why do some people avoid writing or following budgets? 3. Why is it important to maintain an accurate balance of your checking account? 4. Why is it important to keep your own financial records? 5. Why is it a good idea to select credit instead of debit when using your debit card for purchases? 6. Explain how a zero based budget helps you save money. 7. Describe the ways an agreed upon budget can improve your relationship. 8. What is an envelop system and how does it work? 9. What are some things you can do to make sure you stick to your budget? BE SURE TO ANSWER THESE QUESTIONS – IN DETAIL – AND UPLOAD YOUR RESPONSES TO THE NOTES/PODCAST ASSIGNMENT ON CANVAS.