B UDGETING AND R ECORD K EEPING GOALS: Describe and prepare personal budgets. Explain the purpose of record keeping. Prepare a personal net worth statement and a personal property inventory.

I MPORTANCE OF F INANCIAL P LANNING Scarcity-economic problem where consumers’ wants are unlimited but resources are limited Disposable income-money that has been left over to spend or save after taxes have been paid Financial plan-a set of goals for spending, saving, and investing the money you earn

W HY HAVE A FINANCIAL PLAN ? Determine/evaluate options for your money Prioritize your options Avoid careless/wasteful spending Organize sources of income Avoid money worries

P REPARING A B UDGET Budget: spending and saving plan based on your income and expenses 1. Estimate your income. 2. Decide how much to save. Saving: setting aside money to meet future needs 3. Estimate your expenses. 4. Balance your budget.

S IMPLE B UDGET Income Work $320 Allowance20 Lunch money40 Expenses Lunches $ 80 Supplies20 Snacks40 Entertainment140 Total income$380Total expenses$280 Savings To credit union$100 Total expenses plus savings$380

M ONTHLY B UDGET Fixed expenses-costs you are obligated to pay at specific times, regardless of other events. Variable expenses-costs that vary in the amount and type, depending on the events and the choices you make.

P ERSONAL R ECORDS Records of income and expenses Net worth statement Personal property inventory Tax records

P ERSONAL P ROPERTY I NVENTORY : LIST OF ALL VALUABLE ITEMS YOU OWN YearPurchaseApproximate ItemPurchasedPrice Current Value

N ET W ORTH S TATEMENT Assets –Liabilities Net worth Net worth: difference between assets and liabilities Need this information when you apply for a loan or credit Assets: items of value a person owns Liabilities: debts, $ owed to others