Personal Finance Chapters 3 & 4 “Financial Planning and Budgeting”

© EMC Publishing, LLC Establishing Financial Habits Share Save Spend® Sharing Saving Spending

© EMC Publishing, LLC Values are the beliefs & principles you consider important, correct, and desirable; they influence your financial decisions.

© EMC Publishing, LLC 6 Steps in Financial Planning Process 1.Determine your current situation. A.Determine income B.Determine expenses 2.Identify and prioritize your goals. A.Distinguish between needs (a must for survival) and wants (things you would like to have)

6 Steps in Financial Planning Process 3.Develop a long term plan and implement it; adjust your plan and goals over time 4.Organize your records—alphabetical, numerical, or chronological; manage your money with a computer-based system

6 Steps in Financial Planning Process 5.Set up a budget 6.Keep it simple.

What do you think? Discussion © EMC Publishing, LLC What do you value? What do you think most Americans your age value? How do your values affect how you spend your money?

© EMC Publishing, LLC Sharing Sharing is also called charitable giving, philanthropy, and altruism. Sharing connects people and gives them a sense of pride. Volunteer some of your time with an organization that meets your interests.

© EMC Publishing, LLC Paying Taxes Types of Taxes – Social Security / Medicare – Sales – Property – Estate – Income – User fees FICA

© EMC Publishing, LLC Paying Taxes: Forms Form W-4: Withholding Form W-2: Wage and tax statement

© EMC Publishing, LLC Paying Taxes: Forms Form 1040EZ Form 1040A Form 1040 State and local

© EMC Publishing, LLC +$20,179 (Wages) +$15 (Interest) +$650 (Unemployment) −$2,000 (Student Loan) $18,844 (AGI) Calculating Your Taxes Adjusted gross income (AGI) = sum of all sources of income − adjustments – Wages / business income – Interest income – Unemployment – Social Security / pensions – IRA contributions – Student loan payments

What do you think? Discussion © EMC Publishing, LLC Why do we pay taxes? What type of taxes do you pay? What type of taxes are the most fair? What are some examples of tax deductions and tax credits?

Personal Finance Chapter 4

Defining Your Goals Kinds of Goals Distinguish between short-term, medium-term, and long-term goals. – Short-term (up to five years) – Medium-term (five to ten years) – Long-term (ten or more years)

Defining Your Goals Asking Questions Identify your financial goals: – What kind of housing do I want? – Where do I want to live? – What job do I want? – What about my family life? – What will I do for recreation? – How much money will I need?

Defining Your Goals Asking Questions Start planning to achieve your financial goals: – How do I get there from here? – What sacrifice does it take to achieve my goals? – Do my spending habits match my goals?

Defining Your Goals Goal Chart

Creating a Budget Balancing Goals A budget helps you achieve your goals.

Creating a Budget Cash Flow Estimate your income. Estimate your expenses. Estimate your savings. Estimate your sharing.

Creating a Budget Creating a Cash Flow Statement Record your income. – Fixed income—steady Regular wages / salary – Variable income—changes Overtime Side jobs – Mowing lawns – Babysitting

Creating a Budget Creating a Cash Flow Statement Record your expenses. – Fixed expenses—stay the same month to month Rent / house payment Car payment Food Utilities (electric, gas, cable TV, etc.)

Variable Expenses Car repair$125 Dentist co-pay$15 Dancing$20 New Tire$75 Creating a Budget Creating a Cash Flow Statement Record your expenses. – Variable expenses—those that change month to month Auto repairs Medical expenses Entertainment / dates Unexpected emergencies

Using Your Budget Creating a Budget Use cash flow statements. Note surpluses and deficits.

Using Your Budget Qualities of a Good Budget Based on your values Geared toward your goals Practical Flexible Accessible and easy to use Budget  Excellent

Using Your Budget Accounting Records Income Expenditures

Using Your Budget Assessing Constantly assess and reassess budget. Revise when necessary. Fixed Expenses Rent$450 Car Payment$250 Food$275 Utilities$125 Fixed Expenses Rent$475 Car Payment Food Utilities