Chapter 16-2

 A plan for saving and spending.  Allows you to meet your personal goals with a system of wise spending.

 Live within your income  Achieve your financial goals  Buy wisely  Avoid credit problems  Plan for financial emergencies  Develop good money management skill

1. Set financial goals 2. Plan budget categories 3. Maintain financial records 4. Evaluate your budget

 Goals point to where you would like to be financially.  This should consist of long term and short term goals for spending and saving money.

 Saving is an all-important part of reaching your financial goals.  The secret to doing this is P.Y.F. or “pay yourself first”.  Saving should become another “expense” included in your budget.  There are two types of living expenses; Variable and Fixed.

 Cost that occur on a regular basis and are for the same amount each time.  Examples: rent, mortgage payment, insurance premiums

 Living costs that differ each time and may not be as easy to estimate.  Examples: food, clothing, utilities

 The amount of money you plan to use for a certain budget category.

 Savings  Food  Clothing  Housing  Transportation  Health and Personal Care  Recreation and Education  Utilities

 Individuals should record their income and expense to find out if the plan is working.  Expenditures are recorded throughout the month.  The checkbook serves as a reference.

 Actual spending is compared with budgeted amounts and any difference between these amounts is a budget variance.  Deficit: when actual spending is greater than planned spending  Surplus: when actual spending is less than budget amount

 Realistic  Flexible  Evaluated regularly  Well planned and clearly communicated  Simple format