The need for Effective Money Management. Basic Economic Problem ZLimited Financial resources and unlimited wants/needs ZApplies to consumers, businesses.

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Presentation transcript:

The need for Effective Money Management

Basic Economic Problem ZLimited Financial resources and unlimited wants/needs ZApplies to consumers, businesses and government

Importance of Budgeting ZA plan for saving and spending ZHelps achieve financial goals ZWill help avoid credit card problems ZGood financial records must be maintained. ZMust be evaluated from time to time.

Fixed Expense ZOccur Regularly ZSame amount each time

Variable Expenses ZDiffer each time ZMay be a one time bill/payment

The Budgeting Process

Set Financial Goals Z1. Short-term and long-term Z2. A balance sheet-or statement of net worth Balancesheetexample.xls ZCash flow statement (or income statement) help in establishing goals. Z3. The choice of lifestyle will affect the goals.

Plan the Budget Categories ZThe cash flow statement can help establish categories and allowances for each category. ZFixed expenses- occur regularly at the same amount ZExample ZVariable expenses- costs differ each time ZExamples Savings are an essential category Necessary for long-term goals. Helpful for unexpected expenses such as medical

Maintain Financial Records ZA checking account will help in maintaining financial records

Evaluate the Budget ZCompare actual expenditures with budget allowances ZAdjust the budget when necessary *Reasons: ZChange in family situations ZChange in lifestyle choices ZInflation, inaccurate budgeting estimates

Characteristics of an Effective Budget

Realistic 1.Should reflect current income. 2. Expenses should be reasonable according to income

Flexible 1.The budget should allow for unexpected expenses 2.Savings are essential for flexibility

ZEVALUATE REGULARLY

Planned & Communicated to all affected by the budget -Budget should be written -Written budget should be accessible

ZSIMPLE FORMAT