1. Pathways to Success Budgeting Part 1 (lesson #8)
Have students follow along in their booklets.
If you need to break Budgeting Part 1 into 2 lessons that would be fine.
It may take some time for the students to gather the information needed to complete the charts, but would be helpful for them to know what information is needed.
By Sissy Osteen, Ph.D., CFP
PowerPoint by Cindy Clampet
Revised 2017

2. Today you will learn: What is a budget?
How can it help you spend your money wisely?
Today you will learn the importance of having a budget and how it can help you.

3. Which of these is a budget?
Starting to save money in January for the holiday next year?
Saving $1 a week to give a birthday party?
Walking to the grocery store to get milk and bread?
Buying yard sale jeans and day-old bread?
Buying a dress at a discount store?
All of these are ways to save money and could be used in a budget, but none of them are actually a budget
All of these items are things we might do if we have a budget. But they aren’t really budgeting by themselves.

4. A budget is: A Plan for spending your money.
It tells your money where to go
It lets you plan to spend money on the most important things first
There are 5 steps to making a budget:
1) keep a record of your spending now
2) look carefully at your spending
3) decide how to change your spending
4) stick to your plan
5) look at your budget regularly
a BUDGET is a plan for how you will spend your money.
You will tell the money where to go.
You will spend your money on the most important things first. By doing this, you can make sure that your and your family’s needs are met. You can save for the things that might come up unexpectedly and for the things you might like to have in the future.
There are 5 steps to making a budget. You will need to do all 5 steps, and then go back and look at it again every 6 months or year to make sure your budget is still meeting your needs and performing the way you want it to. A budget can be changed at any time if your or your family’s needs change.

5. Step 1—Keep a record of your spending
Your spending will be broken down into the following areas:
Food
Housing and utilities
Household supplies
Car and insurance
Child care and child support
Recreation and personal goods
Medical plus insurance
Savings
Credit payments
Clothing
Other—gifts, church, school, taxes, etc.
It is important to know how you are spending your money now in order to make a budget. You have to know where your money is going in order for you to tell it where to go.
You will need to know if you are spending $200 per month on snacks! This would be an important piece of information when planning a budget!

6. Step 1 continued…
Write down and total your expenses every day of the week. You could save store receipts and break items into the areas of spending.
Do this for each day of the month
At the end of the month, add all expenses for each area of spending
Add all together
The total for the areas of spending will be the same as the total for the month.
Using a calendar to write the expenses down is one good way to keep track of the spending. A small notebook can be used as well. Write the expenses down along with the date. Every time you get a coke or a pack of gum! It all adds up!

7. Using the calendar method
In your booklet, on page 6 there is a calendar example for you to see how you can record your expenses. On page 7, there is a blank calendar for you to use to record your own expenses.
Start on the day you began writing down your expenses. It is best to start on the first day of the month.
Begin writing on the day of the week that you start writing down your expenses, and begin on the first row of the calendar.
Look at samples on page 6 and 7 of the booklet. Show students the example and how to write them down.

8. Step 2—Areas of Spending
On page 9 and 10 of your booklet, there are charts that let you record each expense at the end of the month from your calendar into the different areas of spending.
The example is shown on page 9 and the blank one for you to use is page 10
Use page 10 to record your expenses in each area of spending.
When you add the items on page 7 and then page 10, the amounts should match
After all expenses are written down, you can use the booklet pages 9 and 10 to divide the expenses into different areas of spending, so you know how much you are spending monthly on different things like clothing, food, snacks, etc.
This information will be used in step 3, when you decide if you are spending too much in one of the areas.

9. Periodic Expenses (sometimes called Reserve Expenses)
There are some expenses that come at different times of the year. If you do not save for them, your budget will fail.
Some examples of these are: school clothes and supplies, Christmas gifts, taxes, car insurance, vacation.
You need to budget for these as well.
Save some money every month for your periodic expenses.
A periodic expense is one that doesn’t come monthly. It might be every other month, or every 6 months, or once a year. If you don’t budget and save for these expenses, they will ruin your monthly budget.
Periodic expenses are also called Reserve expenses in some sources. The two terms mean the same thing.

10. What Happens if you Don’t?
If you don’t budget for periodic expenses:
You run out of money the week they are due
You pay them and fall behind on other bills. Sometimes you can’t catch up again
You can‘t pay at all and you lose something
You have to borrow money to pay or use a credit card
What happens if you don’t budget for periodic expenses?
Read slide.

11. How to save for periodic expenses.
Take the total of your periodic expenses for the year. Divide by 12 (12 months in a year) and plan to save that amount each month.
The charts on page 13 and 14 of your booklet can help you figure out your monthly periodic savings amount. Page 13 is an example so you can see how it is done, and page 14 is a blank one for you to use.
Add up your periodic expenses on page 14 and divide by 12.
Get a pretty good idea or “guesstimate” of how much you might spend on your periodic expenses. Add them up and then divide by 12. This is the amount you need to save to cover those expenses when they come up. You need to keep this money is a separate account or in a very safe place where you won’t be tempted to spend it. If you spend it on something other than what it was intended for, you won’t have the money to pay off that expense when it comes due.

12. Step 2, continued, Look Carefully!
You are looking carefully at your spending. You may see that you are spending too much in one area.
List 2 areas you think are too high (booklet, page 15)
Have students look carefully for areas where they might be spending too much money.

13. Step 3—Decide how to change your spending
Booklet page 16, answer the questions
How do you want to spend your money?
What do you want or need to buy in the future?
What each person wants or needs is different.
You may need to change your spending habits.
Use booklet page 16 to lead discussion on how the students might want to spend their money that is different from how they are spending it.

14. Emergency Savings
Everyone needs an account for emergency savings. This includes things that happen that you have to spend money for and they can’t wait.
Your car breaks down
You break a tooth and have to get it fixed
Your child breaks her arm and must visit the emergency room
You hot water heater breaks
It is important to have an emergency saving account to pay for things that come up unexpectedly. Some examples are listed…what are some others you can think of?
Is a great sale at your favorite store an emergency?

15. Emergency Savings
Try to put money into an emergency savings account each month. Set aside the same amount each month
Save until it equals 3-6 months of your living expenses.
(3 months if you have a working spouse and 6 months if no one else in your family is working)
Everyone knows that “stuff happens!” Unexpected things happen that will cost you money. Its hard to budget for these emergencies, but if you have an emergency fund, you will have the money to take care of them when they do.
Try to put as much as you can into your emergency savings until you have it built up to 3 to 6 months of your living expenses. This way, if you get fired or laid off from your job, you will have money to live on for 6 months while you look for a new job.

16. Have trouble saving? To lower expenses you can:
Buy fewer items for a while
What can you buy fewer of?
Spend less for certain items
What can you spend less on?
Make use of your own skills instead of paying someone else
Are you paying someone to do something you can do?
Take a lunch from home instead of eating out
How much are you spending on lunch/snacks out?
Use free community services
Library, free concerts and community events, church events, etc.
There are many ways you can save money, if you will just look.
Most people spend all the money they have, and then even put some on credit. This is not smart, because what you owe will just continue to grow. Get your savings growing instead!
Have the students discuss ways they could save money under each of these in the list.

17. More ways to save:
Lower utility costs by changing heat or air conditioning temperatures—use fans
Move to low price housing
Eat at home more often
Fill cracks around windows with foam insulation
Trade an expensive car for a cheaper one
Shop at thrift stores and garage sales
Look on page 20 of your booklet. What are ways you can lower your expenses?
Continue to discuss.
Page 20 of your booklet is where you can make a plan to lower your expenses.

18. New budget
Now that you have an idea of how to lower your expenses, you can write down a new budget plan.
The chart on page 21 of your booklet is for you to use to set up a budget along with the dates and amounts that are due.
If you are paid weekly, it might be easier to budget your money weekly, but if you are paid twice a month or monthly, it might be easier to set up your budget for the same duration.
Use pages of your booklet to set up a new budget
Use pages 21, 23 and 24 to set up a new budget with the new information you have.

19. Steps 1,2, and 3
You have completed steps 1, 2,and 3 of setting up a budget.
Next lesson, we will look at steps 4 and 5
When thinking about your budget, what are some things that are important to you that might cost money? What would you like to spend your money on in the next 5 years or 10 years?
Discuss what things the students might want in the future.