“The dictionary is the only place where success comes before work.” Objective 8.03 Students will apply procedures to manage personal income and expenses. Mark Twain once said, “The dictionary is the only place where success comes before work.”   “Building Mu$cle” is much the same. It takes hard work and discipline, much of it done out of the limelight.

Essential Questions What are the principles of financial planning? What are the elements of spending plans? What are the steps in the spending plan process, and how is each used?

Principles of Financial Planning We need to learn to live by these principles in order to be: more financially independent and in control of our finances.

Principles of Financial Planning (Jump$tart Coalition) Money doubles by the “Rule of 72” Your credit past is your credit future Start saving young Stay insured Budget your money Don’t borrow what you can’t repay Map your financial future Don’t expect something for nothing High returns equal high risks Know your take- home pay Compare interest rates Pay yourself first The Jump$tart Coalition, http://www.jumpstartcoalition.org/files2010/2010_J$_Calendar.pdf

Money doubles by the “Rule of 72” Percentage Return 72 Divided by Return Years to Double Money 20% 72 divided by 20 3.6 19% 72 divided by 19 3.8 18% 72 divided by 18 4.0 17% 72 divided by 17 4.2 16% 72 divided by 16 4.5 15% 72 divided by 15 4.8 14% 72 divided by 14 5.1 13% 72 divided by 13 5.5 12% 72 divided by 12 6.0 11% 72 divided by 11 6.5 10% 72 divided by 10 7.2 9% 72 divided by 9 8.0 8% 72 divided by 8 9.0 7% 72 divided by 7 10.3 6% 72 divided by 6 12.0 5% 72 divided by 5 14.4 4% 72 divided by 4 18.0 3% 72 divided by 3 24.0 2% 72 divided by 2 36.0 1% 72 divided by 1 72.0 Review how it works... How many years will it take to double your money IF you earn 3% interest? 7% 13%

Start saving young What happens when you earn compound interest? Your principle AND your interest earned previously earn interest What do you have to do to earn compound interest? Leave the earnings in the account so they will earn interest too! http://www.bankrate.com/calculators.aspx?ec_ id=m1012951&ef_id=T7xOUlHIUDMAAE50:201204 03194549:s

Credit past = credit future Your credit past is your credit future

Stay insured How much will it cost you if something happens and you do NOT have insurance to cover it? When is it a catastrophe?

Budget your money ID financial goals Prepare Balance Sheet Prepare Income/Expense Statement Analyze $ in/out Prepare budget Evaluate & revise Create new budget

Don’t borrow what you can’t repay “LIVE WITHIN YOUR MEANS”

Map your financial future Students will summarize what they have learned by completing this sentence in their notebooks: “Mapping your financial future is important because…..” Discuss and compare sentence endings.

Don’t expect something for nothing Is the deal “Too Good to be True”? Watch out!

High returns equal high risks Every person has to determine their personal “RISK TOLERANCE” How much risk do you want to take with your $?

Know your take-home pay Gross Pay = wages BEFORE deductions Net Pay = Take Home Pay

Compare interest rates Use computer software to compare rates. Compare rates at multiple financial institutions BEFORE signing loan contract!

Pay yourself first

Review Elements of Spending Plans Income money earned from wages, salaries, tips, withdrawals from savings and investments, interest earnings, scholarships, sales of properties, and gifts Expenses Fixed expenses---due by a specified date, often agreed upon in a contract; difficult to change in a short time Flexible expenses---not due by a specified date; usually these are easier than fixed expenses to reduce or eliminate Review Elements of Spending Plans Income – Expenses= Net Gain/Net Loss Net gain-when one has more income than expenses, the difference between the two Net loss-when one has more expenses than income, the difference between the two

Smart financial goals Set SMART financial goals link to SMART goal samples

Create a smart financial goal Short term Long term

Organize Determine format to use Select categories for the spending plan Allocate $ amounts to categories Select a time period Organize

Decide Decide--Make realistic decisions and estimates for categories of spending. If income is less than expenses, decide whether to earn more income, decrease expenses, or a combination of these. Expenses Income

implement Implement---put the spending plan into action Pay bills & shop online Implement---put the spending plan into action Note: Implement and control are to be done at the same time. Save & plan ahead for big ticket purchases Watch for sales & Make your $ go further

Control Control --Records kept as the spending plan is implemented reveal potential problems early, such as overspending in one category. Use a computer or calculator to check records for accuracy. Keep a credit spreadsheet to log all credit transactions, including both charges and payments.

Be in Control of your money Be your own best ADVOCATE! Know how much is your: Net pay check Loan balances Monthly budget for a category of spending Savings account Investment account Compare Budget to actual Adjust as needed Plan Set SMART goals Long term Short term Save for big $ items Research Gather info on products and services you need

Where will lack of control get you?

Types of control systems Envelope system Spending plan Computerized software Check register system

evaluate Evaluate--- Determine if the spending plan process has worked Compare estimated income and expenses to actual Assess progress toward financial goals Revise the spending plan (including financial goals) as needed and recycle to beginning of process