Unit 4 Creating a Budget

Objective(s) What is a budget? Activity – Pair up with someone in the room and sit with them and prepare to begin the budgeting activity.

What is a Budget A budget is a plan for managing your money. It is an estimate of income and expenses over a period of time. With a personal budget you get a better idea of: Where you spend your money To whom you owe money How much money you are spending

Objective(s) What are the steps to create a budget? What are the different types of expenses found within a budget?

Step 1 – Analyze Your Situation Take some time to sit back and look at where you are right now in your life before you begin. Some things to consider would be: Financial Situation (do you have a job, are you getting one soon?) Needs Wants

Step 2 – Track Your Expenses Expenses will be anything that you spend money on. Track all of your expenses for at least a week using a tracking worksheet. Even track the items you paid cash for accurate budgeting.

Question????? Think about these four items: Car Payment, Food, Ipad, and College. What do all four items have in common? What is the difference between the four items?

Types of Expenses Fixed Expenses Expenses that are often the same each month. Rent Car Payments Car Insurance Property Taxes Home Insurance School Loans

Types of Expenses Variable Expenses Expenses that are going to differ from month to month in value. Car Maintenance Gas Food Electricity Heating Phone

Types of Expenses Non-Essential Expenses Include most things we do not need, and most often includes items where we waste the most money. Books Movies Magazines Video Games Dining Out Snacks

Types of Expenses Future Expenses Expenses that you know you will eventually have to pay must be factored in as well. Vacation College

Step 3 – Separate Needs & Wants After you have made your lists, check those for places that you can curb costs and eliminate excess costs. Will help you save towards a specific goal. Any place you see you are wasting money, get rid of it.

Step 4 – Set Goals be realistic A student working part-time is not likely to be able to afford a new car every couple of years. be specific “I want to save $5,000 for a down payment to buy a house.” have a timeframe “I want to pay off my credit card within the next 18 months.” state the action to be taken “I want to start an automatic deposit savings account with monthly withdrawals from my checking account.”

Step 5 – Create Your Budget Create a budget for fixed and variable expenses based on projected income. Use a budget worksheet so you can see where you are going to be spending your money as well as saving your money.

Step 6 – Review and Adjust Take some time to do the following: Compare your budget to what you have actually spent. Review financial progress and revise budgeted amounts. You may have to make adjustments at the end of your period of time so your budget can be successful.