1. Answer the questions below in your own words.
starter
Answer the questions below in your own words.
Why is an Annual Income Statement called a “Financial Motion Picture”?
Why is a Balance Sheet called a “Financial Snapshot”?

2. How to start budgeting
DAY 3 NOTES

3. Budgeting tips Dave Ramsey Clip 1
Keep track of all your income and expenses for 1 month.
Adjust budget every month.

4. Budgeting tips continued
3. Spend every dollar on paper before you spend it in real life. 4. Divide annual payments into monthly payments. 5. Use the envelope system for variable expenditures that you want to control. Dave Ramsey Clip 2

5. Monthly Income Statement
“Monthly Financial Motion Picture” Uses your monthly income and expenditures to calculate your cash flow.

6. Monthly Income – Monthly Expenditures
Cash flow
Formula:
Monthly Income – Monthly Expenditures

7. Recommended percentages
ITEM
RECOMMENDED PERCENTAGE
Charitable Gifts
10-15%
Savings
5-10%
Housing
25-35%
Utilities
Food
5-15%
Transportation
Clothing
2-7%
Medical/Health
Personal
Recreation
Debts

8. Example 1: Decide what percent of income is being spent on each expenditure category.
How does it compare to the recommended percentage?
a. Michael has a net pay of $2055 a month. Last month he spent $45 for a new pair of shoes.
b. Rachel has a yearly pay of $40,500. Her monthly rent payment is $850.
c. Terry earns a net pay of $1200 a month. Last month he put $50 in his savings account.
d. Kayla earns a yearly salary of $80,000. Last month she spent $575 on hair styling products and cosmetics.

9. Zero balance budget Spending all your money in your budget categories
Balance at the end of budgeting is $0
Total Monthly – Non-Variable – Variable
Income Total Total

10. Non-variable expenses
Expenses that usually will not change from month to month.

11. Expenses that can be changed to help you live within your means.
Variable expenses
Expenses that can be changed to help you live within your means.

12. Example 2:
Randy collected information on his spending habits over the past month and created a Monthly Income Statement. Calculate Randy’s cash flow then create a budget for Randy to follow next month, making sure that he has put at least 5% of his income into savings. Put a star next to the items that Randy might want to use the envelope system to help control spending.