1. Budgeting and Cash Flow Management

2. Objectives
Describe the relationship between financial planning and budgeting.
Understand how to set and achieve long-and short-term financial goals.
Establish the structural and mechanical aspects appropriate for your personal budget.
Create and implement a budget, cash flow statement, and balance sheet.

3. Budgeting and Cash-Flow Management
IF YOU FAIL TO PLAN,
YOU PLAN TO FAIL!
To succeed in money matters requires implementation of financial plans.

4. Financial Planning and Budgeting
Values
Goals

5. Components of Money Management
Personal Financial Records
Personal Financial Statements
Budget (Spending Plan)

6. Comparison of Statements
PRESENT
Balance Sheet
PAST
FUTURE
Income and Expense Statement (Cash Flow Statement)
Budget

7. Six Phases of Budgeting
Achieve success in financial goals
Evaluate
Control
Implement
Decide
Monitor, review, revise after each period.
Organize
Set Goals

8. Financial Goal-Setting Phase of Budgeting
Setting long-term goals—anything more than 12 months away.
Developing short-term goals from long-term goals
Prioritizing goals
Making goals time and dollar specific

9. Organization Phase of Budgeting
Select recordkeeping format
Use cash or accrual basis
Select budget classifications
Select time periods

10. Organizing

11. Decision-Making Phase of Budgeting
Inflation and other economic factors
Realistic budget estimates
Reconciling initial estimates

12. Implementation Phase of Budgeting
Recording actual income/expenditures
Managing with a cash-flow calendar
Utilizing a revolving savings fund
Calculating time-period totals

13. Control Phase of Budgeting
REASONS FOR BUDGET CONTROLS:
Stay on target
Check progress
Be alert to problems or errors

14. Control Phase of Budgeting
BUDGET CONTROL MEASURES:
Use a checking account
Employ a credit control sheet
Check accuracy
Monitor unexpended balances

15. Control Phase of Budgeting
BUDGET CONTROL MEASURES:
Justify exceptions
Use the envelope system
Employ subordinate budget

16. Evaluation Phase of Budgeting
Compare estimated and actual amounts
Decide how to handle balances
Assess progress toward goals

17. Cash Flow Statement-Step 1 Record Income
Take Home Pay-Net Pay
Discretionary Income-Less than 5% for people under 25

18. Cash Flow Statement-Step 2 Record Cash Outflows
Fixed Expenses
Variable Expenses

19. Cash Flow Statement-Step 3 Determine Net Cash Flow
Surplus
Deficit
Budget Variance
Emergency Fund

20. Example of Cash Flow Statement

22. Ratios For Evaluating Financial Progress

23. Balance Sheet