Personal Finance Budgeting Introduction to budgeting

SMART Goals Ask the audience why they want to budget. What kind of goals do they want to achieve through budgeting. Introduce SMART goals and explain each letter. SMART goals don’t have to be directly related to anything financial. Maybe your goal is to cook at home more. This is not directly a financial goal, but it can help you save money by eating out less. We talk about apply SMART goals to financial goals next.

Financial Goals $375 Aug. Lets say it’s September 2016 The month right now is Sept. 2016 and our goal is to buy a car. Point out where each letter from SMART applies here to the first example of wanting a car in May. We have specified out goal, we want a car. It is time-bound in that we want it by May. It is measurable through the dollar price of the car. We know what actions we must take, we already paid some of it off, and we need to save up for the rest of it. We come to a conclusion of saving $375 a month to accomplish our goal. Now we check if it is realistic. Can we actually save $375 a month without eating ramen everyday for every meal? If it is not realistic, we must revise it. Next we revise it by moving our target date. This lowers each monthly payment making it more realistic.

Planning Tracking Reviewing Steps to Budgeting Planning Tracking Reviewing What is budgeting? Budgeting is made up of three easy steps. Planning Tracking Reviewing, PTR P-T-R

How much income goes toward each expense? What is your income? What are your expenses? How much income goes toward each expense? Some questions to answer during your planning stage

Monthly Budget What is your income? What are your expenses? Here is what a sample budget looks like. (We had this budget sheet that we handed out. If you plan to give handouts of a budget sheet, put a picture of it here) Budgets don’t need to be that complicated, just

$800.00 % Income: Rent: $500.00 62.5% Food: $150.00 18.75% Transportation $25.00 3.125% Fun Money: $50.00 6.25% Savings: $75.00 9.375% Total: 100.00% Example of what a budget might look like Looking at your budget in terms of percentages might be helpful as well giving you another perspective instead of looking at just the dollar amount. You can easily see where most of you money goes this way. All you need to do is take the item in the budget over income. Ex) (Rent/Income) x 100

Pay yourself first Set your priorities Be flexible Planning Tips Pay yourself first Set your priorities Be flexible Tips to help plan Pay yourself first – It’s a good idea to determine how much you want to save before accounting for anything else instead of putting what you have at the end of the month in savings. It is easier to spend what you have so if you put it away in savings first, you are less likely to spend it. Set priorities – rent and groceries come before entertainment Be flexible – Life is full of unexpected changes so always be ready.

T Keep track of every dollar you spend. Take advantage of tools: Mint.com Spreadsheets Moving on to tracking. Know where your dollar goes instead of wondering where it went. Use tools to help you track your money. Every dollar counts! Track everything, even just that $1 you spent on a candy bar. You might be surprised by how much you spend a month on candy or coffee.

Reviewing Budget vs Actual Ask Why Revise Moving on to reviewing. Compare what you budgeted for yourself at the start of the month with how much you actually spent at the end of the month for each category. Did you go over/under your budget? Next, why did you go over or under? Did you have control of why? If gas prices went up by a lot more than you expected, then you couldn’t control that. Last is to revise your budget in the areas where it went wrong. If you over spent and it was something you could control, how could you control it better next month? Determine if you should allocate more or less to certain items in your budget and keep adapting it until it works.

Roadblocks Overcoming Ask the audience how many of them have tried to budget and failed. Ask what set them back, or what made it hard for them. Roadblocks can be a lot of things like spending when you’re stressed, or friends who go out often. You need to identified your personal road blocks and thing about how you can get around them.

I cost $10.00 You make $7.50/hour How many hours do I cost? A good way to look at money differently is to think of it in terms of your time. In this example, we look at the cost of a fast food meal. If it costs $10 and you make $7.50 an hour, then that means 1.33 hours (1hour and 20minutes) of your time at work went into buying this meal. Use this method when thinking of buying other things. If you buy a $60 video game and you make $7.50 hours, you will have to enjoy it for (60/7.50) = 8 hours for it to be worth your money (and time) I cost $10.00

Barriers to Failure Envelope System Automatic Transfers Separate Accounts/Banks Waiting Period Connect Failure to Success Creating barriers to failure so that it is easier to succeed and harder to fail. These are some helpful methods to keep you from failing. The envelope system is where you budget a set amount of money for something like groceries, and ONLY take an envelope of cash with that amount when you go grocery shopping (no credit or debit cards) so it is impossible for you to overspend and splurge. Automatic transfers to your savings account is helpful. Separate banks (have one bank with all your saving money and another bank with your spending money) this way, there is a waiting period when transferring your money forcing you to think about spending. There are cool apps that help you save as well. A co-worker uses an app where if she uses her card on junk food at a vending machine in her dorm, it transfers $5 to her savings account.