1. BUDG TING SKILLS

2. © Quality Online Learning 2016 Creating a budget that works Introduction  Why budget?  Budgeting pitfalls  Your financial goals  When to review  Reducing your outgoings  Managing changes in circumstances  How much money do you need? o Purchases o Regular expenses o Occasional expenses o Financial emergencies  Creating your budget plan 1. Budgeting basics 2. Your budget plan 3. Balancing the books

3. © Quality Online Learning 2016 Creating a budget that works What this course is unable to do. If you are struggling with debt, please seek professional advice.

4. © Quality Online Learning 2016 Budgeting basics Why budget?  Proactive  Prepare for financial emergencies  Reduce waste  Achieve financial goals  Achieve o Peace of mind o A sense of control “A budget is telling your money where to go, instead of wondering where it went.” Dave Ramsey Budgeting = personal financial planning

5. © Quality Online Learning 2016 Budgeting basics Budgeting pitfalls 1.Spending more than you earn 2.Irregular spending reviews 3.Being too rigid 4.Ignoring savings 5.Making yourself miserable

6. © Quality Online Learning 2016 z Budgeting pitfalls Spending more than you can Spiral of debt: Danger signs: 1 st principle: To have money coming in than you have going out http://www.moneysavingexpert.com/loans/debt-help-plan  Non-mortgage debts > ½ your after-tax salary  In debt, but don’t know what for

7. © Quality Online Learning 2016 Budgeting pitfalls Irregular spending reviews Review receipts often:  More likely to follow through  See a difference sooner  Avoid over-spending  Make it a habit

8. © Quality Online Learning 2016 Budgeting pitfalls Being too rigid Prepare for:  Annual events  Variable costs  Irregular expenses  “Rainy day fund”

9. © Quality Online Learning 2016 Budgeting pitfalls Failing to save Save something every month  Create security  Don’t wait the end of the month  Treat savings as out of bounds “Do not save what is left after spending, but spend what is left after saving.” Warren Buffet

10. © Quality Online Learning 2016 Budgeting pitfalls Making yourself miserable Good budgeting:  Budget for treats  Value your time

11. © Quality Online Learning 2016 Budgeting pitfalls Your financial goals Complete the “financial values” exercise in your workbook What is important to you?

12. © Quality Online Learning 2016 Budgeting basics What’s important to you? Successful budgeting: Conscious choices Save with a purpose in mind Makes choices easier Increases motivation to save Improve your quality of life “If your only goal is to become rich, you will never achieve it.” John D. Rockerfeller

13. © Quality Online Learning 2016 Budgeting basics Turning your goals into financial plans HOW MUCH, and WHEN? Total amount ___________ = amount to save every month. No. of months  Adjust target date if necessary “Don’t tell me what you value. Show me your budget, and I’ll tell you what you value.” Joe Biden Turn your priorities into achievable financial goals: Living debt free = pay off credit cards and loans Start my own business = save to survive unreliable income New washing machine = how much does it cost?

14. © Quality Online Learning 2016 Budgeting basics Summary

15. © Quality Online Learning 2016 Assessment – Part 1

16. © Quality Online Learning 2016 Your budget plan Introduction Where is your money going right now?  Review receipts for one month  Revise the figures for following months  Adjust for priorities and longer-term plans Successful budgeting: spend less than you earn

17. © Quality Online Learning 2016 Your budget plan How much money do you need? Monitor your purchases  Keep all your receipts, record at end of day  Record what, not where  Record everything  Make it accurate - don’t write what you’d prefer to see  Family budgets – what everyone spends

18. © Quality Online Learning 2016 Your budget plan How much money do you need? Regular expenses  Monthly, quarterly and annual amounts o Fixed (mortgage, insurance, subscriptions) o Variable (utility bills) o Include savings Annual payment / 12 = monthly amount Quarterly payment / 4 = monthly amount Variable expenses – find an average monthly amount

19. © Quality Online Learning 2016 Your budget plan How much money do you need? Occasional expenses  One-off events: weddings  Holidays: long vacations or weekends away  Christmas and birthday gifts  Vet bills  Car repairs  Car insurance  And many more Review bank statements Choose categories Calculate annual total for each Include everything, even if it’s unlikely to happen next year Total / 12 = monthly amount

20. © Quality Online Learning 2016 Your budget plan How much money do you need? 3-6 months’ worth of expenses Save now for security when you need it 10% of your income every month, or Set a deadline: Total amount/ no. of months = monthly saving amount Add windfalls, and monthly surplus Treat as out of bounds Financial emergencies: set up a “rainy day fund”

21. © Quality Online Learning 2016 Your budget plan How much money do you need? Record of:  Purchases for one month o Factual o Complete o Categorised  Regular bills  Occasional expenses  Rainy-day fund From: http://www.mymoneycoach.ca/sites/default/files/Budget%20Worksheet.pdf

22. © Quality Online Learning 2016 Creating your budget plan Spreadsheets: Flexible Reliable Faster than paper Free Categorise expenses, e.g.: Home Transportation Dailiy living Health Social & Entertainment Gifts Obligations Savings http:// www.vertex42.com/ExcelTemplates/ personal-monthly-budget.html Categorise Income: Salary and tips Refunds Prizes & gifts Sales And more

23. © Quality Online Learning 2016 Creating your budget plan Managing occasional expenses  Yearly cost / 12 = monthly amount  List separately or mark with *  Create a total of all occasional expenses  Transfer to savings at start of month

24. © Quality Online Learning 2016 Creating your budget plan Have you spent more than you have earned? Use formulas to automate Add ‘budget’ column:  Carry over figures  Adjust for next month  Need to cut down? o Where can you reduce your spending? o Can you increase your income?  Left-over money? o Safety net o Increase spending elsewhere o Transfer to savings

25. © Quality Online Learning 2016 Creating your budget plan Ready to review?  Record new spending  Compare with budget Difference = Budget - Actual Add “Actual” and “Difference” columns

26. © Quality Online Learning 2016 Creating your budget plan SUMMARY One-month budget plan: Income (from previous months) Initial expenses (from previous months) Totals Planned budget Space for actual spending Difference column Budget summary

27. © Quality Online Learning 2016 Creating your budget plan Managing cash flow  Make payments directly after income arrives o Have enough money o Avoid spending what you need  Start your budget month on pay day What do you need to do? Do your debits fit with the date you get paid? Are your savings automated? Do you have the savings accounts you need? Make notes of what you need to check or update.

28. © Quality Online Learning 2016 Assessment – Part 2

29. © Quality Online Learning 2016 Balancing the books Budgeting is a cycle  Monitor  Review  Evaluate Review:  Year 1: monthly  Year 2: every 3-4 months  Year 3+: annually

30. © Quality Online Learning 2016 Balancing the books Reducing your outgoings Painless savings  Reduce energy costs  Annual or monthly payments: choose cheapest option  Shop around or haggle for better deals  Water meter?  Shop in sales  Pay off cards in full every month  Move to low- or no-interest credit cards  Visit filling station during other trips  And many more

31. © Quality Online Learning 2016 Balancing the books Reducing your outgoings Slightly more painful cuts  Lose “money leaks” o Buy small items in bulk o Allocate free spending money (fixed fund) o Stop purchases you don’t use o Leave your plastic at home o Prioritise what is important to you

32. © Quality Online Learning 2016 Balancing the books Reducing your outgoings Want vs need Discretionary spending:  Do you want this or need it?  Not sure? Try going without “You have succeeded in life when all you really want is what you really need.” Vernon Howard

33. © Quality Online Learning 2016 Managing changes in circumstances New circumstances = time to review Losing your job Financial emergencies Getting married Having a baby Changes in interests or habits Getting a raise Extra money – decide where to spend

34. © Quality Online Learning 2016 Summary Creating a budget that works  Budgeting = proactive  Save more  More security  Budgeting pitfalls o Spending more than you earn o Irregular spending reviews o Being too rigid o Ignoring savings o Making yourself miserable  Your financial values o Understand your spending choices o Turn into monthly savings plan  How much money do you need? o Purchases o Regular expenses o Occasional expenses o Financial emergencies  Creating your budget plan o Excel spreadsheet o Income and expenses o Expenses: categories o Initial spending o Adjust for next budget  Budget review: o Year 1: monthly o Year 2: every 3-4 months o Year 3+: annually o Whenever circumstances change  Painless savings o Look for better deals o Reduce interest o Pay off cards at end of month Slightly more painful cuts o Manage ‘money leaks’ o Want vs need Budgeting basics Your budget plan Balancing the books

35. © Quality Online Learning 2016 Assessment Part Three