G1 The Essentials to Take Charge of Your Finances Spending plans Advanced

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona The Costs Add Up ItemAverage Yearly Expense Daily Latte at $2.50 Eating lunch out 5 days per week at a cost of $5.00=$10.00 each time Daily can of soda or chips at $1.00 each Daily candy bar at $1.00 Daily can of chew or pack of cigarettes at $3.79 Weekly attendance at a sporting event with $3.50 admission and $5.00 for snacks Monthly haircut at $25.00 per month Monthly movie and popcorn for two at $20.00 Monthly gym membership at $38.00 Do not let money fly away! By creating a spending plan, a person can realize everyday expenses, reduce these expenses, and increase current income. Beginning at age 15, if a person saved $ per year by not having a can of soda everyday, they would have $105,504 extra to retire on at age 50 with a 8.5% interest rate compounded yearly. $ $1, $2, $ $1, $ $ $ $456.00

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Having a plan  Financial planning is a process individuals engage in to achieve long-term financial success while having a quality standard of daily living  A Spending plan is a paper or electronic document used to record both planned and actual income through expenditures over a period of time Step 2– Creating Personalized Income and Expense Categories Step 1- Track Current Income and Expenses Step 5– Evaluate and Make Adjustments Step 4– Implement and Control Step 3– Allocate Money to Each Category Step 3– Allocate Money to Each Category

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Income  Gumball machine represents components of the financial planning process  Income is money earned Gumballs going into the machine Wages from a job, allowance, gifts

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Expenses  Expense is money spent  Money going out of the gumball machine Fixed expenses may have a fixed amount due each month and are contractual Flexible expenses can vary each month in the amount owed and are not contractual

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Spending plan activity  Decide if each item is income, a fixed expense, or a flexible expense  Indicate a response by walking to the corresponding activity sign

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Spending plan activity Rent Fixed expense Wages Income

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Spending plan activity Groceries Flexible expense Internet bill Fixed expense

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Spending plan activity Tips Income Utilities Fixed expense

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Spending Plan Activity Automobile Registration Fixed Expense Eating Out/Snacks Flexible Expense

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Spending Plan Activity Scholarships Income Hobbies Flexible expense

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Spending Plan Activity Gift from Family Income Savings Fixed Expense

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Developing a spending plan – step 1  Track current income and expenses Individuals will determine what income and expenses they have within a give period of time  Usually concurrent with an individual’s pay day Monthly Bi-monthly Step 2– Creating Personalized Income and Expense Categories Step 1- Track Current Income and Expenses Step 5– Evaluate and Make Adjustments Step 4– Implement and Control Step 3– Allocate Money to Each Category Step 3– Allocate Money to Each Category How are you able to track your expenses?

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Gross vs. Net Pay Total amount of money earned during a pay period (salary or hourly wage x hours worked) Gross Income Taxes Retirement Health Benefits Payroll Deductions Take home pay (the amount of the paycheck) Net Income When calculating spending plan expense categories, use net pay

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona SAMPLE

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Creating personalized income and expense categories – step 2  Each spending plan is unique because of individual and family values  Categories are based upon the individual’s/family’s income and expenses Step 2– Creating Personalized Income and Expense Categories Step 1- Track Current Income and Expenses Step 5– Evaluate and Make Adjustments Step 4– Implement and Control Step 3– Allocate Money to Each Category Step 3– Allocate Money to Each Category

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Spending plan category pie chart

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Housing  Housing Housing is the largest of the four major expenditures Approximately 30% of an individual’s net income  Monthly payment – A fee charged each month to live in a home  Utilities – include electricity, water, and garbage fees

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Housing What are examples of expenses that are associated with housing?

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Transportation  Transportation The second largest major expenditure Approximately 20% of an individual’s net income  Monthly payment – is made if a loan is taken out to purchase a vehicle

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Transportation What are examples of expenses that are associated with transportation?

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Food  Food The third most expensive category within an individual’s spending plan Approximately 15% of an individual’s net income

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Food What are examples of expenses that are associated with Food?

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Insurance  Insurance Arrangement between an individual and an insurance company to protect the individual against risk  Risk is uncertainty about a situation’s outcome Approximately 7% of an individual’s income

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Insurance What are examples of expenses that are associated with Insurance?

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Additional expenses  Savings and investing Save 3-6 months of income that is available in a liquid account for emergencies  Other Fulfills additional needs and accounts for 18% of an individual’s net income

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Allocate money to each category – step 3  Reference tracking from step one to be realistic about expenditures and income Think if there were any unique expenses in the past month that should be included  Consider changes that need to be made Identify ways to implement that change  Consider financial goals and money that needs to be allocated Step 2– Creating Personalized Income and Expense Categories Step 1- Track Current Income and Expenses Step 5– Evaluate and Make Adjustments Step 4– Implement and Control Step 3– Allocate Money to Each Category Step 3– Allocate Money to Each Category

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Allocate money to each category  Net gain is remaining money to either save, spend or invest  Net loss an individual is spending more money that he/she is earning and has to use credit (borrowed money) to meet their financial obligations  A spending plan should have income and expense matching one another (reach zero)

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Implement and control – step 4  When individuals implement their spending plan  Must develop control systems to track their income and expenses Continually compare them to their spending plan to ensure they are on-track and make changes to prevent credit or savings use Step 2– Creating Personalized Income and Expense Categories Step 1- Track Current Income and Expenses Step 5– Evaluate and Make Adjustments Step 4– Implement and Control Step 3– Allocate Money to Each Category Step 3– Allocate Money to Each Category

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Implement and control  There is not one correct control system. Depends upon the individual/family Envelope systems – individuals place the actual budgeted amount of cash from a paycheck into a specific envelope system for the expense Check register system – This helps consumers to track all expenditures in a checkbook register which has been divided into spending plan categories Electronic spending plan systems – Multiple types of software are available for consumers to use to help keep track of their financial records

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Evaluate and make adjustments – step 5  Assess if spending plan is working  Make changes if necessary  Analyze if goals are being met  Begin the process again Step 2– Creating Personalized Income and Expense Categories Step 1- Track Current Income and Expenses Step 5– Evaluate and Make Adjustments Step 4– Implement and Control Step 3– Allocate Money to Each Category Step 3– Allocate Money to Each Category

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona gumball analogy  Income (money in)  Net worth (wealth)  Flexible Expenses (money out)  Fixed Expenses (money out) Always have more money coming in than out! Work towards building wealth!

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona Insurance  Includes the following: Health – pays a portion of health care expenses if one is sick or injured Disability – provides financial support if an individual is injured and cannot work Life – provides financial support to an individual’s beneficiaries upon death

G1 © Family Economics & Financial Education –Updated August 2009– The Essentials to Take Charge of Your Finances – Spending Plans Advanced Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at The University of Arizona ANY QUESTIONS