1. What are the benefits of having a budget?
Grab a scratch sheet (from the front table) and jot down your thoughts on the following question.
What are the benefits of having a budget?

2. Budgeting to Achieve your Financial Goals 3.3
Chapter 3
Budgeting to Achieve your Financial Goals 3.3

3. Lesson Objectives Create a budget that’s practical for you.
Achieve your financial goals by increasing your savings.

4. Preparing a Practical Budget
Budget – plan for using your money in a way that best meets your wants and needs.

5. Step 1: Set your Financial goals
Plan your savings, spendings, and investments
Based on current lifestyle and hope of lifestyle in the future
Remember make goals specific, with time-frame, realistic, and how you’ll achieve!

6. Step 1: Set Financial Goals
Financial Goals: Pay off car loan, save for college, take vacation trip, increase investments.

7. Step 2: Estimate your Income
Record estimated income for the next month
Include all sources of income (take-home pay, interest from savings acct)
Don’t include unforsure income (gifts, bonuses)
Estimate on your best guess
Best guess – as students you might work sporadic hours and your pay is different every week. Take your best guess.

8. Step 2: Estimate Your Income
Budgeted Amounts
Income
Salary and interest income $3,550
Step 2: Estimate Your Income

9. Step 3: Budget for the Unexpected
Set aside a specific amount each month
Suggested six months’ worth of living expenses

10. Step 3: Budget for Unexpected Expenses and Savings
Budgeted Amounts
Outflows
Unexpected Expenses and Savings
Emergency fund savings $100
Vacation savings
College savings
Investment savings
Total savings
Step 3: Budget for Unexpected Expenses and Savings

11. Step 4: Budget for Fixed Expenses
Fixed – those that don’t change
Mortgage
Automobile
Student loan payments
Insurance premiums

12. Step 4: Budget for Fixed Expenses
Budgeted Amounts
Fixed Expenses
Mortgage $700
Automobile loan
Student loan
Insurance premiums
Total fixed expenses 1,200
Step 4: Budget for Fixed Expenses

13. Step 5: Budget for Variable Expenses
Consumer Price Index (CPI) – measure of the changes in prices for commonly purchased goods and services in the US.

14. Step 5: Budget for Variable Expenses
Budgeted Amounts
Variable Expenses
Food $500
Clothing
Utilities
Entertainment
Medical
Transportation
Personal allowances
Total variable expenses 1,200
Step 5: Budget for Variable Expenses

15. Step 6: Record what you spend
Track actual income and expenses
Budget Variance – difference between the budgeted amount and the actual amount that you spend.
Surplus or deficit

16. Step 6: Record What you Spend
Budgeted Actual Amounts Amounts
Variable Expenses
Food $ $600
Clothing
Utilities
Entertainment
Medical
Transportation
Personal allowances
Total variable expenses 1, ,175
Step 6: Record What you Spend

17. Step 7: Review spending & Saving patterns
Budgeting = continual process
Review financial progress
Falling behind on bills?
End with a surplus of money?
Revise goals
Adjust budget

18. Step 7: Review Spending and Saving Patterns
Budgeted Actual Variance Amounts Amounts
Variable Expenses
Food $ $600 (100)
Clothing
Utilities
Entertainment
Medical
Transportation
Personal allowances (25)
Total variable expenses 1, ,175 (75)
Total outflow , ,625 (75)
Step 7: Review Spending and Saving Patterns

19. How to budget successfully
Preparing a budget = successful budgeting
Good budget:
Carefully planned – no wild guesses
Practical – base purchases off of true income
Flexible – will encounter unexpected expenses
Written & Easily Accessible

20. Ways to increase your savings
Set aside a specific amount each month
Choose a payroll savings deduction
Make an effort to spend less each day
MUST set aside that money