UNIT 1: Financial planning, income and taxes

Standards & Objectives Define the concept of personal finance and explain the importance of financial planning. Objectives: Define personal finance and financial planning Examine the value of having a process of planning how to use money. *Set up your notes, and write an essential question!

NOTES Vocabulary Personal Finance: the way a person handles their individual expenses and income. Financial Planning - is a process of setting goals, developing a plan to achieve them, and putting the plan into action. It’s creating a roadmap for handling everything you do with your money—spending, saving, using credit, and investing.

“Most people don’t plan to fail… They simply fail to plan!” 1) Discuss how a financial planning can be an important tool in helping achieve goals.

The Five-Step Financial Planning Process NOTES The Five-Step Financial Planning Process

Quick Write (QW): Write down five need and five wants, try to rank them in order of importance #1-5

Sample Wants and Needs NEEDS Food for breakfast Clothes for school Transportation to school or work ______________ WANTS An iPOD DVD Players Cell Phone Hot Car ______________

Values A belief or idea you consider important or desirable: NOTES Values A belief or idea you consider important or desirable: Getting a good education Religious faith or beliefs Social causes Handling money responsibly Friendships / The people I hang out with 1) What kind of things to you think affect a person’s values?

Summary & Closing Anyone want to share? What did you learn? What did you like or dislike about your reading? IN YOUR NOTES! Answer your essential question for the day!

Assignment! Log onto the computer Google “importance of personal financial planning” Browse and choose an article to summarize and reference. READ the article, then write a summary paragraph about the (article/blog/news report) Copy and past the URL onto the bottom of your summary. Save in your electronic portfolio as: AA1 – Importance of Personal Finance

Standards & Objectives 2) Write long, mid, and short-term goals while evaluating factors that may influence the goals. Objectives: Create personal financial SMART goals. Evaluate factors that affect goal setting and income. *Set up your notes, and write an essential question!

Term Goals Less than one year 1-5 years 5 or more years NOTES Term Goals SHORT-TERM GOALS Less than one year INTERMEDIATE-TERM GOALS 1-5 years LONG-TERM GOALS 5 or more years 1-E

Delayed Gratification NOTES Delayed Gratification When we wait for something we want so that the situation is better, or more for our overall benefit. Saving money over time to make a major purchase. Waiting to buy a new product until the price goes down. Waiting to see the latest movie until the crowds get smaller and the lines shorter. 1-F

S-M-A-R-T GOAL CRITERIA Specific Measurable Attainable Realistic NOTES Time-Limited 1-G

Specific…….. Measurable… Attainable….. Realistic……. Time-Limited.. SMART Goals Specific…….. “Pay for lodging, transportation, meals for a 5-day trip to Washington, D.C.” Measurable… “$300 through fundraising, $50 from birthday money, save $25 a week.” Attainable….. “If I stick to my plan, I’ll have the money when I need it.” Realistic……. “I still have enough money to live on while I work toward this goal.” Time-Limited.. “I need to have all the money by 6 months from now.” 2) Use the details here to write this goal into one long SMART goal sentence!

Summary & Closing IN YOUR NOTES! Answer your essential question for the day!

Partner Work! You will work with a partner to create a “fairy tale life style” You will analyze the following How much money is needed per year? What type of education or training would be needed to make this happen? How many people would be involved? What are the short, mid, and long term milestones for the finances?

SMART Goal Worksheet Analyze each goal on the worksheet, using letters (S.M.A.R.T) detail which components are missing. Rewrite each goal with SMART format in one long sentence.

Assignment! Write one short term personal financial goal under today’s notes. Make sure it contains all SMART components.

Standards & Objectives CTE P.F #1) Define the concept of personal finance and explain the importance of financial planning. CTE P.F #2) Write long, mid, and short-term goals while evaluating factors that may influence the goals. CTE P.F #6) Describe factors affecting take home pay such as tax withholdings, benefits and payroll deductions. Objectives: Calculate Income and describe the various types. Describe payroll deductions and their deduction rates. Analyze various types of taxes and the factors effecting income withholdings. *Set up your notes, and write an essential question!

Where’s my MONEY?? And why is my paycheck so small 

Income and Tax Terms NOTES Salary – a fixed amount that you receive for a standard amount of work, usually calculated per year. Base Pay – a fixed amount you receive either per year or per hour regardless of sales or performance. Commission – a variable amount you receive based on your performance or sales in addition to your base pay. Hourly Pay – a fixed amount you are paid per hour, only for the hours you work. Over Time – usually 150% (or time and a half) of your hourly rate for working over the standard 40 hrs per week.

NOTES Minimum Wage – the minimum amount an employor is allowed to pay their workers. This is determined by the state and does not count if there is commission in addition to hourly wages. Bi-Weekly – getting paid every other week no matter the number of weeks in a month. Semi-Monthly – getting paid twice a month (usually the 1st and the 15th) despite the number of days or weeks in a month. Gross Pay – the total amount of pay including salary, overtime pay, commissions, and bonuses. Net Pay – the total amount of money received by the employee after all deductions from their pay check. These deductions may include insurance, garnishments, and taxes. Taxable Income – the total amount used to calculate taxes owed at the end of the year. Found by taking gross pay and subtracting taxes paid, qualified deductions and credits.

Calculating Income When planning your financial future, or simply trying to manage your money; it is important that you can calculate your income. You need to be able to determine the amount of money you need, or want to make. You also need to be able to determine the amount of money you are owed in order to verify your pay amount. You need to be able to plan the amount of money you need to save for your future goals. Tax deductions and limits are important to pay attention to. Being knowledgeable about tax liability can reduce your risk of tax problems.

Example 1 Calculate each type of Income. NOTES Example 1 Calculate each type of Income. A job paying $10.85/hr, guaranteed 40 hr/wk A job paying $750 bi-weekly A job paying $750 semi-monthly A job paying $11.00/hr, guaranteed 30 hr/wk $22568 $19500 $18000 $17160

Example 2 NOTES Assume you work at Hollister and $7.65 an hour. You are guaranteed 40 hrs a week, and if you work overtime you receive time and a half pay. If you work 45 hours this week, what is your gross pay? $306.00 $344.25 $459.00 $363.38

NOTES Example 3 You just got a new job at a used car lot. You receive $100 dollars per week for your base pay, and $100 dollars commission for every car you sell. How many cars do you have to sell in order make $2,000 for the month of February. (Assume Feb. has four weeks) 16 12 10 21 4(100) + x(100) = 2000 400 + 100x = 2000 100x = 1600 x= 16

NOTES Example 4 Sherry makes $36,000. She gets a tax deduction of $5950 because she is single. She receives no other credits. What is her taxable income?

Your Money is THEIR Money! How do we get from gross pay to net pay? By removing deductions from the gross pay. What is included in theses “deductions”? Taxes, primarily, but also health care contributions, retirement, or garnishments. What is the definition of Net Pay? The actual amount of money you receive each pay check.

Summary and Closing Answer your essential question to close out your notes for today.

Assignment Calculating Income Worksheet Goals Worksheet Due Friday 8/22

Standards & Objectives CTE P.F #6) Describe factors affecting take home pay such as tax withholdings, benefits and payroll deductions. Complete a W4 Tax form. Objectives: Describe factors affecting income. Complete tax forms with accuracy. Analyze federal taxes and their purposes. Set up your notes, and write an essential question!

Because of this… IRS (Internal Revenue Service): federal agency that collects taxes. 16th amendment (1913) allowed for Federal Income Tax

NOTES We have these… Federal Income Tax – is a graduated marginal tax collected for the federal government. Employers are required by law to with hold it, and the amount depends on several variables. Your income Your marital status Your with holding allowance deductions (exemptions) Single Standard Deduction is $10,000 Married Standard Deduction is $20,000 Additional Dependent Deductions are $3900 each.

Tax Formulas NOTES TAXABLE INCOME = ANNUAL GROSS INCOME– (STATUS DEDUCTIONS)-(PERSONAL DEDUCTIONS)-(DEPENDENDT DEDUCTIONS) **Deductions can be called exemptions. **Credits come off your tax owed after tax is calculated. Example 1: Calculate the taxable income if Sally is married with two children and her and her husband’s gross salary for 2013 was $68,000.

Federal Insurance Contributions Act (FICA) Tax Supports federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides hospital insurance benefits for the elderly. Social security – a tax that is collected for the federal government to pay of retirement and disability benefits. However, this fund may not be available in the future. Medicare – a tax that is collected for the federal government to pay for hospitalization insurance. NOTES

Revenue sharing: a share of tax funds provided by the federal gov’t to state gov’t, or state gov’t to local gov’t. Ex: Medicaid NOTES

Social Security and Medicare Taxes NOTES Social Security and Medicare Taxes Social Security taxes   2014 Employee 6.2% on earnings up to $113,700 Employer Self-employed 12.4%* on earnings up to $113,700 Medicare taxes Employee/employer (each) 1.45% on all earnings Employee Only (Addt. Medicare Tax) 0.9% additional on earnings over $200,000 2.9%* on all earnings below $200K

Example 1 Calculate FICA withholdings using the information below. Federal Taxable Income: 60,000 Employed by Staples, Inc Married, two children Example 2 Calculate FICA withholdings using the information below. Federal Taxable Income : 175,000 Employed by Snap On, Inc Single, no children

Example 3 Calculate FICA withholdings using the information below. Federal Taxable Income : 375,000 Employed by Forbes Corporation Single, Three kids Example 4 Calculate FICA withholdings using the information below. Federal Taxable Income : 53,000 Owns a Landscaping Company Married, two kids

After you’ve been hired, complete a… NOTES After you’ve been hired, complete a… W-4 form: employee tells employer withholding allowances and SS #; employer is able to determine amount of monthly taxes to be withheld from person’s paycheck.

Filing your tax return each year NOTES After each year concludes, you need to tell the government whether you paid “too much” or “too little” in taxes during that year. W-2 form: employer mails this to employee, and is then used to fill out 1040EZ or 1040 tax return. The W-2 form (next slide) lists all of your earnings and taxes from the previous year.

W2 Form

NOTES 1040EZ form: used to file tax return for previous year; taxable income less than $50,000; taxpayer has no itemized deductions. 1040 form: use to file tax return for previous year; taxable income greater than $50,000; taxpayer has itemized deductions.

Summary and Closing Assignment Answer your essential question(s) in your notes! Assignment Read the directions, and complete the W4 form as you were doing it for an employer. DO NOT PUT YOUR REAL SOCIAL SECURITY NUMBER: 123-45-6789

NEXT DAY Tax Simulations on irs.gov

Standards: CTE – P.F #6) Describe factors affecting take home pay such as tax withholdings, benefits, and payroll deductions. Objectives: 1. Analyze payroll deductions and their costs. 2. Discuss employee benefits options. 3. Evaluate retirement account options.

Vocabulary NOTES Payroll Deduction – any amount of money that is deducted by your employer prior to you receiving your paycheck, but after taxes. Payroll Reductions – any amount of money that is deducted by your employer prior to you receiving your check, before taxes! *affects gross pay Group Health Insurance – insurance that may be provided by your employer at a lowered cost to you if you agree to have the cost deducted from your check. Retirement Account – an account that can be set up through your work, such as an 401K, and the amount you select can be taken out of your check and deposited into your retirement account.

Deductions & Reductions http://www.ofm.wa.gov/policy/25.50.htm NOTES Mandatory Deductions – Federal taxes, FICA Taxes Voluntary Deductions – loan repayment, savings bonds, tuition, dues, employee organizations, charitable contributions Mandatory Reductions – State retirement, higher education retirement plans Voluntary Reductions – dependent care accounts, flexible spending accounts, health savings accounts

Google! Google: Common Employee Benefits Choose an article. Read! Write a summary of the article and save it in your folder, copy the URL on the bottom of your article. When you are done, proof read your tax summary from yesterday again. Make final changes. Put your name on it, and print it!

Summary and Closing Assignment Answer your essential question(s) in your notes! Assignment Using your notes create a review activity for Unit 1. You must be able to share this with other in class tomorrow. Examples: Crossword puzzle, flash card game, matching game, worksheet, quiz.

EXTRA SLIDES TO MOVE TO OTHER UNITS AS NEEDED!!! End Unit 1 EXTRA SLIDES TO MOVE TO OTHER UNITS AS NEEDED!!!