1. Money Management Strategies
CHAPTER 5
“How do you decide to spend money? Every decision you make between two choice is an opportunity cost. Decisions about money management involve numerous trade offs”
What is a budget and why should you use one? Ask the class- does anyone budget today or have a savings plan? (most likely no…) So why is it important?
Answers may vary: Plan for using money to pay for things you need to live. When you make a budget, you set your financial goals, estimate your income, list your planned expenses, and set targets for saving. The budget helps you distinguish between wants and needs. (Review- ask for examples of wants vs needs)

2. Section Objectives
Discuss relationship between opportunity costs and money management
Explain the benefits of keeping financial records and documents
Describe a system to maintain personal financial documents

3. Savings Plan Savings Plan
A plan for using money to meet your needs and wants
Individual
Calculates-costs, revenues, and expenses over a period of time
Business
Formal written statement of expected income and expenses for a future period of time
How did you come up with your savings plan for your trip?
A savings plan is a plan you create for using your money to meet your needs and wants
You would use this plan to calculate your costs, revenues, and expenses over a period of time. Similarly, a business would use this plan but have a formal written statements with their expected  income and expenses for a future period of time.
How did you come up with the savings plan for your trip?
determine how much $$ you are going to spend on the trip, how much money you make, and how much money  you are able to save
A lot of financial experts recommend at 50/30/20 budget. That approach allocates 50% of your after-tax income for necessities, 30% for wants and 20% for savings (for retirement and an emergency fund) and paying off debt). Your vacation money should come from which category? Wants.
Like you did yesterday, you will want to map out your costs and fit those costs into your budget.

4. Budget Plan for using money to pay for the things you need to live
Financial Goals
Estimate your income
List your planned expenses
Set target for savings
Budget helps you distinguish between wants and needs
Review your financial progress and make adjustments
A budget is a plan for using money to pay for the things you need to live. It will take into account
-your financial goals (Managing your money properly is going to depend on your financial goals.  For example, if your goal is to save as much money as possible to pay for college you may rent a book from the library instead of buying it on Amazon. If you’re goal is just to set aside a certain amount of your paycheck each month to invest/save, you may add the cost of the book into your budget.)
-estimate your income
-list your planned expenses
-set target for savings
A budget helps you distinguish between your wants and needs
you can review your financial progress and make adjustments to your budget overtime.

5. How do you decide when to spend money?
Every decision you make between two choices is your opportunity cost.
Decisions about money management involve numerous trade-offs.
every decisions you make between two choices is your opportunity cost
ex: I have a science project due tomorrow but all my friends are going to the movies. If you go to the movies instead of working on your science project, the opportunity cost of going to the movies is a good grade on your project. The opportunity cost of working on your project is spending time with your friends and watching a good movie
decisions about money management involve numerous trade offs

6. Money Management
Day-to-day financial activities necessary to get the most from your money.
Money trade-offs
Give me an example of something you shop around for…
Money Management is the day to day activities necessary to get the most from your money. To manage your money wisely you have to consider financial trade-offs. Should you spend your paycheck on entertainment or deposit into your savings account?
Give me an example of something you shop around for? (how do you decide where to go out to eat? -location, cost, type of food)
Shopping around for a cell phone plan (service quality, unlimited options, cost, etc)
Shopping around for school supplies (who has a sale on folders/binders/etc)
Question for the class: How are money management and opportunity costs/trade offs related? Money management is getting the most out of your money. To accomplish this you must make sound decisions regarding trade-offs, selection the option that is financially beneficial.

7. Organizing Financial Records
CHAPTER 5 SECTION 1

8. Financial Documents
First step in effective money management is to organize your financial documents.
Benefits:
Financial status
Pay your bills on time
Tax reports
Future planning
Investing decisions
The first step in effective money management is to organize your financial documents.
- these documents tell you how much you own, and how much you owe
the benefits:
-determine your current financial status
-pay your bills on time
-tax reports
-plan for the future
-make sound financial decisions related to your investments

9. What financial documents should you keep and organize?
Ask the class- what financial documents should you keep and organize ? (list answers on the board) -where do you keep them?

10. Answer. Pay stubs Bank statements Broker reports
Credit card statements
Automobile titles
Birth certificates
Marriage licenses
Tax forms
pay stubs, bank statements, broker reports, credit card statements, automobile titles, birth certificates, marriage licenses, tax forms.
you can keep these things in  file cabinet at home , a safe-deposit box in a bank, or your computer

11. What are some ways to organize these documents?
how to organize these documents?

12. Answer.
Locate your documents and sort them into categories such as payroll stubs, savings account, checking account, bills, etc.
Label and file each document
Maintain filing discipline
Locate your documents and sort them into categories such as payroll stubs, savings account, checking account, bills, etc.
Label and file each document
Maintain filing discipline
Anything that is difficult to duplicate  (like a car title) should be stored somewhere safer, anything you store on the computer should be backed up so you have a duplicate somewhere

13. Safe-Deposit Box
A small, secure storage compartment that you can rent at a bank.
slide 12: Safe-Deposit Box
this is where you should keep important documents such as car titles and mortgage loan papers
A safe deposit box is a small secure storage compartment that you can rent in a bank.

14. p. 141 in your book read and discuss
read p. 141 in your textbook and discuss in groups of 4
What are things that have become obsolete because of technology? CD players, 35mm cameras. What have survived? Desktop computers, - why- they can house more hardware and business prefer them
How could these processes be used in developed nations like the U.S.
ex. Venmo?
Many banking services can be performed online including money transfers. I have a banking app for my bank accounts, I place trades online for my brokerage accounts, i can send money via venmo

15. Personal Financial Statements
CHAPTER 5 SECTION 2

16. #1.Personal Balance Sheet
Know as a net worth statement, is a financial statement that shows what you own and what you owe
Step 1: Determine Assets
Step 2: Determine Liabilities
Step 3: Calculate Net Worth *Net Worth –the difference between the amount you own and the debts you owe
Step 4: Evaluate Financial Situation
Pg. 127 in text

17. Determine Assets
Any items of value that you own, such as cash, real estate, personal possessions, and investments
Liquid Assets
Real Estate Assets
Personal Possessions
Investment Assets

18. Liquid Assets Cash and items that can quickly be converted to cash.
$800 in a savings account and $72 in cash
Your liquid assets are worth $872

19. Other assets Real estate assets Personal Possessions Investment Assets
The amount recorded on the real estate portion of your balance sheet is the property’s market value, or the price at which the property would sell
Ex. If you would sell your condominium with a market value of $235,000 and a parcel of land valued at $72,000 you list the total value at $307,000.
Personal Possessions
Collectible items
Fine Jewelry
Rare coins
Racing bicycles
Cars
Investment Assets
Stocks
Bonds

20. Determine Liabilities
Current (short term debt) - paid within one year
Long-term – Debts that require a longer term of repayment
Insolvency – the inability to pay debt when it’s due

21. Turn to p. 134 in your book and complete #6.

22. #2 Cash Flow
CHAPTER 5 SECTION 2

23. Cash Flow Statement
Movement of cash in and out of your wallet and/or bank account.
Step 1: Record your income
Step 2: Record your expenses
Step 3: Calculate your net cash flow
Pg chart

24. The next slide lists several types of accounts
The next slide lists several types of accounts. Categorize each account as belonging to the personal balance sheet or cash flow statement.

25. Take-home pay
Transportation
Checking Account Balance
Groceries
Credit Card Balance
Investment income
Student Loan Payment
Mortgage

26. Answers Take-home pay – Cash Flow (Income)
Transportation- Cash Flow (Expenses)
Checking Account Balance - Personal Balance Sheet (Liquid Asset)
Groceries- Cash Flow (Expenses)

27. Answers
Credit Card Balance- Personal Balance Sheet (Current Liabilities)
Investment income- Cash Flow (Income)
Student Loan Payment- Cash Flow (Fixed Expense)
Mortgage-Personal Balance Sheet (Long-Term Liabilities)

28. #3 Your Financial Position
CHAPTER 5 SECTION 2

29. Worksheet 5.1 and 5.2

33. CASH FLOW STATEMENT Income – Cash Inflow Take-Home Pay $1,800
 Take-Home Pay
$1,800
 Investment Interest
$53
Total Income
 $1,853
Expenses – Cash Outflow
Fixed Expenses
 Student Loans
 $510
 Transportation Costs
 $250
Variable Expenses
Utilities
 $230
Groceries 
 $110
Gasoline
 $50
Total Expenses
 $1150
NET CASH FLOW
 $703

34. Get out paragraph and answer key(s)

35. What is your net worth? Deficit – spend more than you earn
Loans make up for deficit – increases liabilities
Surplus – spend less than you earn
Increases net worth
Invest – pay off debts – etc.

36. #4 Preparing a Budget
CHAPTER 5 SECTION 3

37. Budget
A plan for spending and investing your money to meet your wants and needs.
Step 1: Set your financial goals
Step 2: Estimate your income
Step 3: Budget for unexpected expenses
Step 4: Budget for fixed expenses
Step 5: Budget for variable expenses
Step 6: Record spending
p. 136

38. Budget Definitions Budget Variance Discretionary Income
The difference between the budget and the actual amount spent.
Discretionary Income
The money you have left over paying for your essentials i.e. rent, utilities, clothing, transportation, etc.

39. Increasing Your Savings
CHAPTER 5 SECTION 3

40. Increasing Your Savings
Essential component – open a savings account
PAY YOURSELF FIRST!
PAYROLL SAVINGS DEDUCTION
SPENDING LESS TO SAVE