What is Budgeting? IncomeExpensesSavings

 What is Income? Where does it come from?  What are some sources of Income?  Things to consider…  Federal and State Income Tax, Social Security, Medicare Gross Income - Taxes = Net Income

 What are expenses?  What are some examples? Exercise 2A Monthly Expenses Food$200 Gas$100 Entertainment$200 Clothes$50 Cell Phone$100 Utility Bills$150 Auto Insurance$100

Fixed PeriodicVariable

 Using the pie chart you just created, decide if each expense is fixed, variable or periodic  Does the majority of your money go toward fixed, variable or periodic expenses?  Do you have primarily one type of expense?

 Variable expenses fluctuate in amount  For example, you can spend more or less on groceries depending on what you buy: VS.

 The most important expense…SAVINGS  Increases the likelihood of reaching your SMART goals  Pay Yourself First (P.Y.F.) strategy

 Whenever you receive income, immediately set aside a certain amount  Don’t miss the money, it’s like you never had it in the first place  Savings becomes an expense to add to your budget

 Is savings a fixed or variable expense?  How might this work as each?  When might you use a fixed approach? A variable approach?

1. Set SMART goals 2. Analyze Information 3. Create a Plan 4. Implement the Plan 5. Monitor and Modify the Plan

 A Budget is a plan that outlines an individual's financial and operational goals  It is a plan that serves to allocate resources, evaluate performance, and formulate plans  Helps to prioritize spending $100$300$800

 Establish a time-frame (weekly, monthly?)  List all money coming in as income  Divide expenses by type and list (Don’t forget P.Y.F.!)  Subtract your total expenses from your total income  Analyze your budget…update it regularly

Estimated Income: Paycheck (after taxes)$2000 Fixed Expenses: Savings$1400 Rent$300 Estimated Variable Expenses: Food$200 Gas$50 Periodic Expenses: Car Insurance ($300/6 months)$50 Total Expenses: $2000 Total Income-Total Expenses:$2000-$2000=0

 Jessica earns $8/hour working approximately 25 hours a week. About 30% of her pay is deducted for taxes. She earns about $15 a month in interest.  Her monthly expenses are $235 for car payment, $35-45 for cell phone, $40-60 for gas, and $50 for auto insurance. She also likes to buy games, music, clothes and electronics.  Her short-term goal costs $1000, but she has already saved $500. Her long-term goal is to attend college and she has already saved $7000.

 Checking Account Statements  Savings and Investment Statements  Pay Stubs vs. W-2  Tax Documents  Insurance Statements  Loan and Credit Card Statements  Receipts and Warranties

Envelope System Track with Checking Account Tally System Budget Spreadsheet Personal Finance Software

 Label envelopes with each of your expense categories. When you receive money, distribute it among the envelopes based on the expense amounts from your budget. When the envelope is empty, you are either done spending in that category or you must move money in from another envelope. Note the date and amount whenever putting money in and out of an envelope RentCarCable

 Tally System - Keep a tally of your spending categories and save your receipts  Checking Account Tracking – Monitor your deposits and withdrawals. As you spend cash, note how much spent and what you bought.  Budget Spreadsheet – Create a spreadsheet to track expenditures and cash inflow  Personal Finance Software

 Creating a budget (and sticking to it!) is a critical part of the Financial Planning Process  Helps achieve SMART goals  Make the most of your money

 Unit Assessment 2-1  Use your spending log from Unit 1 to develop a budget plan for the next month