MoneyCounts: A Financial Literacy Series Budgeting 11-A Grange Building University Park, PA 16802 financialliteracy.psu.edu finlit@psu.edu 814-863-0214

Budgeting is the fundamental step in achieving financial literacy Budgeting is the process of creating a plan to spend and invest your hard earned money wisely to meet your personal and financial goals in life Budgeting is not a mathematical exercise that individuals think they have to endure. Rather, it is the result of self-assessment of our relationship with money. It is a necessary road map to steer us toward a higher standard and quality of living Description

Learning Outcomes Understand the concept of budgeting Identify the making of a budget Create a personal budget Forecast a future budget

What is Budgeting? Income Expenses

SMART Goals Specific Measurable Attainable Realistic Timely S M A R T

How to set SMART Goals? General goal ex) “Be Free of Credit Card Debt.”  

SMART goal steps: S M A R T Specific Measurable Attainable Realistic Timely S M A R T Identify the credit cards Verify the amount owed Decide how much extra payment to send each month to meet your goal Calculate how much you can spare from your budget to pay off debt State when you want to reach your goal

SMART goal I have 2 credit cards Visa and a Mastercard. I owe $2,400 on them combined. I would need to pay $200 each month, which I can afford in my budget, to pay off the debt in one year time. Once I am free of this debt, I will charge only things that I need and able to afford to pay back in full and on time by the due date of these credit cards.

Collecting information Pay stub Bank records Financial aids awards Tuition and fees bills Bookstore bills Credit card bills Utility bills Electronics Insurance Groceries Receipts Eating out receipts Personal  Pets Miscellaneous

Life cycle of receipts Paper receipts Purpose and life cycle Electronic purchases Debit transactions Credit transactions

Organizing information

Tracking money coming in Wages, salaries, self-employment Family help Interest income Investment income Child support income Alimony Public assistance Other income Grant and scholarships Loans Perkins Subsidized Unsubsidized Other loans

Income versus loans/debt Earning Employment Investment income Borrowing Loans Credit cards

Financial assessment Am I saving any money for my future goals? Do I have an emergency fund? Am I accumulating unnecessary debt? Do I need that many credit cards? What have I borrowed in student loans so far? Do I have enough financial resources available to graduate college on time?

Tracking money going out Tuition, fees, books Housing and utilities Groceries Clothes and personal items Car expenses, electronics, insurance, eating out, pets, etc. Periodic expenses, gifts, entertainment, charity, etc.

What gives?

Identifying expenses What are my fixed and variable expenses? What are my needs (non-negotiable)? What are my wants (negotiable or desirable to have)?

Spending leaks Identifying spending leaks Correcting spending leaks Focus on goals Set priorities

Balancing the budget Monthly Expenditures of NEEDS and WANTS Net Monthly Income (no debts) Saving Monthly Expenditures of NEEDS and WANTS

MoneyCounts: A Financial Literacy Series Comments and questions 11A Grange Building University Park, PA 16802 financialliteracy.psu.edu finlit@psu.edu 814-863-0214