Building: Knowledge, Security, Confidence Budgeting

2 Anticipation Guide What do you already know? Complete the chart by filling-in the pre-reading columns only.

3 What is a Budget? Budgeting is: An important step to financial security About making smart choices with your money

4 Purpose of budgeting Learn how to manage money by preparing a personal spending plan Identify ways to decrease spending and increase income

5 Three Kinds of Goals Short-term –within next 2 months Medium-term –2 months to 3 years Long-term –beyond 3 years into the future What are your goals?

6 Goal Setting Guidelines Be realistic Be specific Have a time frame Say what you want to do Have milestones

7 Imagine an accident that could happen to you that could result in high financial costs. If you have insurance, gumballs go into the bowl. ---Without insurance coverage gumballs leave the bowl. Insurance

8 Major Expenses ---The four major expense categories: housing, transportation, food, and taxes.

9 Finance Your Dream Consider the discussion questions before we view the following clip: ideo2.html

10 To make a Budget or to NOT Make a Budget? It is easier than you think… but it takes work!

11 Four Steps to Preparing a Budget 1.Keep track of your daily spending 2.Determine monthly income and expenses 3.Decrease spending 4.Increase income

12 Step 1: Keep Track of Daily Spending Many people spend all their money. The key is to control your money! Know where your money goes Keep a daily spending diary or log Cut expenses to save for goals

13 Step 2: Determine Income/Expenses Income comes in the form of: Allowances Wages from a job Miscellaneous work (like cutting grass) Interest and dividends from investments

14 What You REALLY Earn: Income Your employer must subtract certain taxes from your paycheck It may take longer to reach your goals

15 Gross Income: Total income without deductions Net Income: Gross income after deductions and other taxes What You REALLY Earn: Income (continued)

16 Take-home pay is less than gross pay Take-home pay

17 Expenses: items you pay for each month Housing and car payments Insurance Food and clothing Utility bills Step 2: Determine Income/Expenses Personal, child or pet care Entertainment School

18 Expenses Two types: –Fixed –Variable

19 Fixed Expenses do not change Car payment Rent Variable Expenses might change Electricity Food Clothing or entertainment Expenses (continued)

20 Step 3: Find Ways to Decrease Spending

21 Spend less than you earn. Two ways: 1.Spend less 2.Receive more

22 Carrying little cash and controlling your credit card use Not shopping “for fun” Remembering your savings goals Buying only what you need Paying your bills on time to avoid extra fees and charges You can decrease spending by: Step 3: Find Ways to Decrease Spending

23 Step 4: Find Ways to Increase Income People receive more by becoming more productive.

24 Education and earnings Higher pay usually goes along with more education. –Median income by group (2003) High school dropout$20,176 High school graduate$27,768 Some college$32,396 College graduate$46,384 Advanced degree holder$57,408 3 volunteers needed

25 Our Baseball Draft Candidate 1 Right field Bats yard dash: 8.0 Fan appeal? Candidate 2 Center field Bats yard dash: 7.9 Fan appeal? Candidate 3 Shortstop Bats yard dash: 5.1 Fan appeal? Who would you choose?

26 #1 Draft Pick? Decisions depend on productivity. Employers want team players who can get the job done. More productive = more $$$

27 These help you: Record income in advance Plan ahead to pay your bills Budgeting Tools

28 Monthly Payment Calendar Month ________________________________ SundayMondayTuesdayWednesdayThursdayFridaySaturday 12 $25 savings $150 car $30 insurance 3 $166 school $25 personal 45 $25 interest (income) 6 $30 cell phone $400 paycheck $40 phone bill $10 credit card $400 paycheck 28 $40 concert 2930

29 Help! I Can’t Pay My Bills! Scenario: You add up your bills and the total is $900, but your income is only $600…. What would you do? Think about the bills that would be the most important!

30 Help! I Can’t Pay My Bills! (continued) If you have to choose, think of major obligations first: Pay your rent or mortgage Pay necessary household expenses Pay high- interest loans Talk to your creditors

31 CONCLUSION: To make a Budget or to NOT Make a Budget?

32 Do we really need to budget? Clayton and Katrina seem normal…

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37 Average household spending

38 How do you spend your money? Do you know? Where can you cut back? Pay yourself first!

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