Luke Erickson College of Agricultural and Life Sciences Adapted from Dollar Decisions by Marsha Lockard, Marilyn Bischoff & Linda Gossett

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What is A Budget? 4 A budget is a financial document used to project future income and expenses. A budget is an itemized summary of probable expenses and income for a given period. A budget is a spending plan that you decide upon. A budget is a plan expressed in dollar amounts that acts as a road map to carry out an person’s objectives, strategies and assumptions.

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What is a budget? 6 Spending less than you earn, but still having fun!! A good way to reach your financial goals! Building a financial plan around your goals, is a way to get and stay motivated. A good way to “get on the same page” with spouse and family members.

Is your budget in bad shape? Start by tracking expenses! Write everything down. Use bank statements Receipts A notebook Website or software tracking Find out where the money actually went, before you worry about where it should go. 7

Tracking vs Budgeting What is the difference? Tracking = Record of past expenses Budgeting = Plans for future expenses 8

Budgeting Set target amounts “I would like to spend $50 on gas this month” “I don’t want to spend any more than $30 on eating out this month. “I want to give $25 to charitable causes this month” 9

Budgeting Target amounts cannot exceed expected income!! Gas - $50Income: $1,400 Food - $200 Rent - $600 Insurance - $200 Car Payment - $300 Entertainment - $100 TOTAL: $1,450 10

Budgeting Target amounts cannot exceed expected income!! Gas - $50Income: $1,400 Food - $200 Rent - $600 Insurance - $200 Car Payment - $300 Entertainment - $50 TOTAL: $1,400 11

Tools

Notebook Write down expenses and income as they happen. Add up each month. Set target spending amounts for upcoming month Pros and Cons? 13

14 Receipts Keep all receipts; if you do not get a receipt, write it on scrap paper Put receipts in a box, envelope, or other container Add up at the end of the month Pros and cons?

15 Envelopes Label envelopes with category, amount and date due Divide cash into envelopes Save unused money Pros and Cons?

16 Calendar List income on the date received List expense on dates made Write in due dates for bills Mark when paid Pros and cons?

17 Checkbook/Statements Use check register or similar ledger forms to record expenses Not just checks Use statements from debit/credit card accounts Also record cash expenses Pros and Cons?

Paper budget form Pre-made categories Compare goals with actual expenses Still need to track individual expenses Pros and cons? 18

19 Computer Software Software Microsoft Money ( support discontinued, 2009) Quicken FPU Personal Finance Software You Need a Budget (YNAB) Others? Pros and Cons

Spreadsheets Microsoft excel spreadsheets Free budgeting templates Make your own – customized spreadsheet CALC – Free Open Office spreadsheet software. Pros and Cons 20

Internet Websites Mint.com Wesabe.com Geezeo.com Buxfer.com Yodlee.com Others? Pros and Cons? 21

Accountability Partner Set a dollar amount $30, $50, $100, etc. Cannot spend over that dollar amount without discussing first with accountability partner. Who can be an accountability partner Spouse, parent, trusted friend 22

When should you stop tracking/budgeting? The majority of millionaires track their expenses every month and use spending goals. Do you want to join the club? If so, that’s a pretty small price to pay. 23

Millionaire Next Door Thomas J. Stanley & William D. Danko The majority of America’s Millionaires Tracking and spending plan. Drive used cars. Own modest homes, but are completely paid for. Have savings for emergencies. 24

So, you’ve tracked and budgeting, but keep coming up short. What can you do? There’s really only two choices. Decrease expenses Increase income

26 Decrease Expenses Pay bills on time Buy generic or store brands Combine shopping trips to save time and money What else can you think of? EXPENSES

Unnecessary Fees & Extras? Checking and Savings Accounts Phone bill Internet Services Cable or Satellite Services Tax Preparation Buying a Car Unnecessary Insurances

28 Seperate Needs and Wants Needs are necessary to live Without them we may jeopardize our health, safety or well being. Wants are the things that make our lives more comfortable and more enjoyable. Wants are limitless!!! Before making a purchase ask yourself: Do I need it? Is it my #1 want?

N&W Activity Polarity activity 29

30 What would you do with:

31 But many of us already spend this way. Spending leaks: Giving up what you REALLY want, for something you just sort of want right now.

Spending Leak: Example Spending leak: Cupcake twin pack $.95 Bag of potato chips $.70 Can of pop $.60 Every day $2.25 Every five days $11.25 Every four weeks $45.00 Every year $585.00! 32

Step Down! 33

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36 Increase Income Volunteer to work overtime Rent an unused bedroom or garage Have a yard sale Sell stuff online Get a second job What else can you do? INCOME

Maximize Non-Money Income Fringe Benefits from Employers Do-It-Yourself Projects Barter & Exchange Other ideas?

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