1. Budgeting Creating a Personal Budget

2. What is a budget?
“A budget is a written record of the money that flows in and out of your household* every month.”
* or pocket!

3. Why budget?
Budgeting is the first step on the road to financial success.
Controlling your day to day finances allows you to do the things you want to do.

4. Balancing income & expenses
Start budgeting now – don’t wait until you’re financially “on your feet” to begin to budget.
A budget is nothing more than the activity of balancing income vs. expenses.

5. Creating a personal budget
Track your expenses
Figure out the amount of money you’re spending
How much money do you have to spend?
What are you spending that is not a necessity?

6. There are two types of expenses -
Essential expenses – HAVE to have in order to live
Example: housing or food
Non-essential expenses –DON’T HAVE to have in order to live
Example: Cable TV or Entertainment

7. Essential – Fixed - Expenses
A Fixed Expense is an expense that stays the same from month to month.
Mortgage or rent
Insurance – auto & home
Car payments
School loans

8. Essential – Variable - Expenses
A Variable Expense is an expense that changes or does not stay the same from month to month.
Car maintenance
Gas
Food
Electricity, heat
Phone

9. Non-Essential Expenses
Clothing*
Movies
Video games
Going out to eat
Other items, you want, but don’t need

10. Related Expenses
A Related Expense is an expense that is tied to a previous purchase.
Examples:
If you purchase a car, your related expenses will be…insurance, gas, repair, maintenance, etc.
If you purchase a pet, your related expenses will be…pet food, vet bills, flea medicine, etc.

11. Some possible expenses . . .
Housing
Phone
Magazine subscriptions
Garbage
Electricity
Gas/Electricity
Water/Sewer
Pet Food
Insurance
Prescriptions
Internet
Movie Rentals
Food
Insurance
Medical Bills
Gym Membership
Entertainment
Toiletries
Credit Cards
Entertainment
Loans

12. Balancing Income & Expenses
At the end of the month, break everything down into categories.
Is your income greater than your expenses?
YES! – Great, then you can save.
NO! – There’s a problem!

13. Expenses > Income? What can you cut out?
Going out to eat too often?
Buying things you don’t need?

14. How to save. . . Pay yourself first! (savings)
Cut back on non-essential expenses
Take advantage of discounts or use coupons

15. And don’t forget . . .
A quick and easy way to save a little money is to toss your spare change into a jar or piggy bank!
You should review and go over your budget on a regular basis.
Your budget will change as your get older and your lifestyle changes.
Your budget will change if you move, decide to have kids, get a new job, etc.

16. Why do budgets fail? Negative Attitude Lack of motivation
Unrealistic expectations

17. Financial Goals
Identify and write down your financial goals.

18. Financial goals may be:
Vacation
College
New car
Down payment for a house
Paying off credit card debts

19. Setting financial goals
Short term – less than 1 year
Mid term – 1 to 3 years
Long term – 3 years or more

20. Goals should be: Specific – what is the goal? Realistic
How much should I save?
How long will it take me?
Realistic

21. Short term goal -
In most cases, you can take the amount you want to save and divide by the number of months.
Goal: Buy the latest sneakers/shoes for $300
When: 3 months
How much? $100 per month
Is that realistic?

22. Mid term goal - Goal: $3,000 vacation When: in 18 months
How much? $167 per month
Is that realistic?

23. Long term goal - Goal: $1,800 for a down payment on car
When: in 3 years (36 months)
How much? $50 per month
Is that realistic?