Teens lesson three the art of budgeting presentation slides 04/09

the budgeting process phase 1: Assess your personal and financial situation (needs, values, life situation). phase 2: Set personal and financial goals. phase 3: Create a budget for fixed and variable expenses based on projected income. phase 4: Monitor current spending (saving, investing) patterns. phase 5: Compare your budget to what you have actually spent. phase 6: Review financial progress and revise budgeted amounts. teens – lesson 3 - slide 3-A

goal-setting guidelines teens – lesson 3 - slide 3-B well-written personal and financial goals SHOULD: be realistic A student working part-time is not likely to be able to afford a new car every couple of years. be specific “I want to save $5,000 for a down payment to buy a house.” have a timeframe “I want to pay off my credit card within the next 18 months.” state the action to be taken “I want to start an automatic deposit savings account with monthly withdrawals from my checking account.”

assessing your situation List your top 5 goals for each of the following headings (Remember – Goals should be specific & realistic): –Educational Goals –Social Goals –Financial Goals –Family Goals –Health/Physical Goals –Recreational Goals Circle 2 goals from each category that are most important to you. Identify each goal as follows: –Short-term (1-4 weeks) –Medium-term (2-12 months) –Long-term (1 year or longer)

setting personal goals From the goals that you circled and identified, chose the top 5 goals and rank them from highest to lowest. For each of these goals, answer the following 2 questions: –What can I be doing right now to work toward this goal? –What resources will I need to achieve this goal?

sources of income Identify your current sources of income: –Jobs –Allowance from Parents –Alimony/Child Support –Investments Consider what it means and how it feels to be… –Financially Dependent –Financially Independent

expenditures For 1 month, keep track of everything you spent: –What did you buy? –Can you see a pattern in your spending habits? –What did you need? –What did you want? How did you decide what to spend and where to spend it? –Categorize how money is currently spent Clothing, Food, Video Games, etc. –Anticipate future categories that could be added to the list –Review notes from Making Decisions Consider: What might make a habitual Spender turn into a Saver? What could turn a Saver into a Spender?

why budget What comes to mind when you hear the word “budget?” –(Remember: YOU control the budget, the budget doesn’t control you!) Reasons to Budget –Puts you in control –To determine how much money you have to spend –To decide how you want to spend your money –To determine how to spend money in the future –To learn to live on less than available income –To stay out of financial trouble –Creates a visible picture of spending patterns –Helps prevent impulse spending

setting up and maintaining a budget Estimate your income Estimate your expenses, to include: –Fixed regular monthly expenses –Fixed irregular monthly expenses –Flexible monthly expenses –“Mad Money” Estimate your future expenses –Begin by keeping a record of everything you spend –What are your goals and plans for meeting those goals? Plan & Cope with Change –Plan for new situations –Plan for Changing Conditions that might increase/decrease your income. Keep your personal and financial goals in mind and budget accordingly.

setting up and maintaining a budget Balance your budget –Each month, compare your income to your expenses. Continue reworking your budget until your income is greater than your expenses –Discuss your different budget options Set up a personal budget now and continue to use it! Let it grow and expand as you continue through middle school, high school, college, and life! There is probably an app for budgeting.

setting up and maintaining a budget teens – lesson 3 - slide 3-Ca incomebudgetactualdifference Job #1$$$ $$$ Other$$$ total monthly income $$$ expensesbudgetactualdifference fixed regular expenses Rent$$$ Car insurance$$$ Car payment$$$ Credit card$$$ fixed irregular expenses Savings$$$ Food$$$ Utilities$$$

setting up and maintaining a budget (continued) teens – lesson 3 - slide 3-Cb expensesbudgetactualdifference transportation Bus fare$$$ Gas and oil$$$ Parking and tolls$$$ Repairs$$$ other Medical expenses$$$ Clothing$$$ Entertainment$$$ Household items$$$ Personal items$$$ Tuition$$$ School expenses$$$ total monthly expenses $$$

tips for maintaining a budget Become a good consumer –Learn how to get the most for your money Comparison shopping Coupons Advertisements Exercise willpower and self-control –Try to not indulge in unnecessary spending. –Allowing yourself a night out, a new video game, or a new outfit periodically is fine, but always allow for it in your budget! Develop a good record-keeping system –Learn how to maintain a workable budget Evaluate your budget regularly and adjust as needed. –Since most payments are made on a monthly basis, it is a good idea to update once a month.