1. Planning a Budget
Chapter 28

2. Money Management Money is a limited resource
Most people want more goods and services than they can afford
Money management—the process of planning how to get the most from your money
Budget—a plan for using your money in a way that best meets your wants and needs
Expected income
Planned expenses
Planned savings

3. Five Steps to Planning a Budget
Set goals
What do I want to accomplish?
In one month?
Estimate Income
Income - actual amount of money you earn or receive during a given time period
Weekly allowance is income
Tips as a waiter/waitress
Interest on savings accounts

4. Income, con’t.
Gross pay - total amount of money you earned for a specific time
Ex.—20 * 7.25 =
Net pay - deductions are taken from gross pay for federal and state taxes, and social security taxes; AKA take-home pay
Health insurance
Retirement
Union dues
Other income could come from other family members who work and contribute
Do not count on gifts or unusual income

5. Taxes
Withholding - subtracting taxes from a paycheck to be forwarded to the government
Federal
State
Local
Social security
Employers are responsible for forwarding the taxes withheld to the government units that assessed them
Self-employed persons pay their taxes directly to the government

6. Estimate Expenses
Expenditures include rent, food, transportation, and unexpected expenses like medical care
Fixed expenses - occur regularly and are paid regularly; usually remain consistent in amount
Rent
Insurance
Car payment
Variable expenses - the amount and frequency may fluctuate
Food
Phone charges
Entertainment
Gifts

7. Plan for Savings
Saving money will make it possible for you to meet future wants
They will protect against expenses that are not in the budget
Car blows a tire
You break a bone and have to see a doctor
Savings will help with long-term goals
Buy a computer
Take a vacation
Balance and adjust the budget
Total estimated income should equal the total estimated expenses
Budget variance - the difference between how much you planned to spend and how much you actually spent

8. A Sample Budget Set Goals
List goals – short-term goals and long-term goals
Decide which goals are most important – what wants are the most important to you
Estimate Income – divide yearly net income by 12 (monthly budget)
Know how much money you have available each month
Your take-home pay (net income)
Income from investments or rental properties
Interest from savings accounts (if applicable)

9. Balance and Adjust the Budget
Plan for Savings
Have a regular, systematic plan to save
Cut expenses if necessary
Balance and Adjust the Budget
Keep accurate and complete records
Organize expenses in categories
Total actual expenses for each item each month
Balance the budget
Compare actual totals with budgeted amounts
Adjust the budget
Make changes in the budget if necessary
Ex. Decrease amounts budgeted if actual amounts were less
Increase amounts budgeted if actual amounts were more
Find places to decrease

10. Use a Computer for Budgeting
Software programs are available to help with setting up and maintaining a household budget
With a computerized budget, you can:
Save your data each month
Analyze expenses
Use “What If” situations
What if your income increases or decreases?
What if your expenses increase or decrease?

11. Budget
Annual
Monthly
Income – after expenses
31,200
2,600
Fixed Expenses
Rent payments
7,800.00
650
Insurance payments
1,200
100
Loan and credit card
2,220
185
Variable Expenses
Food
4,800
400
Utilities (heat, electric)
1,920
160
Phone/Internet
1,500
125
Car repair/transportation
1,860
155
Contributions/gifts
720 60
Health and personal care
1,140 95
Travel
600 50
Entertainment
900 75
Clothing
Household
3,000
250
Savings
Total Expenses
31200
2600