1. Budget Basics

2. What is a Budget? A plan for spending and saving money
“A budget takes the fun out of money”
Mason Cooley

3. Budgeting: A Perspective
“Budgeting has a bad rap. Too many people who give budget advice are detail people and/or control freaks. They make you think that if you don’t record every taco and pair of pantyhose, you’re on the road to financial ruin. You don’t have to track every penny to have an effective financial plan. The secret is setting priorities. Pay yourself first, then pay your bills, then you can blow what’s left with a clear conscience”
Ann Coleman

4. Why Do Budgets Get a Bad Rap?
Does the mere mention of the word “budget” conjure up images of drudgery and deprivation? You’re not alone. Most people think budgets are
Rigid and inflexible
Painful – who wants to eat Top Ramen every night?
No fun!

5. Why Budgets Really Do Make Sense
A good budget should help you set priorities and achieve what’s important to you. Not what’s important to your banker, your best friend, or your relatives. A good budget should be
Flexible: It should change as your needs change.
Ongoing: It’s not a one-time event. A budget should be part of your everyday life.
Clear and easy to use: 12 page spreadsheets are out!

6. Budgets: Where to Start
Be clear on what you make and how much you spend.
Anticipate all of your potential expenses.

7. Budget Categories Income Savings Expenses Gross Net Emergencies
Long-Term
Retirement
Short-Term
Expenses
Fixed
Variable
Discretionary

8. Income: The Amount of Money Earned
Gross income: An individual’s income before taxes.
Net income: Income after taxes are paid.
Fasten your seat belts: Taxes can range from 15% to 31%. Yikes!

9. The Amazing Disappearing Paycheck
Your first real job pays $30,000/year. You’re rolling in the bucks, right? Not necessarily.
Your salary is your gross income. Take off at least 25% for taxes and other deductions. That’s what’s left for you to spend.
Example:
Gross salary = $30,000
Minus 25% taxes and deductions ,500
Net income $22,500
Quite a hit, huh?

10. Savings: Pay Yourself First
Savings is unspent income.
Types
Emergencies: Plan to set aside three months’ living expenses
Long-term: Large ticket items (house, car, college)
Retirement: It’s never to early to start
Short-term: Vacation, clothes, new skis

11. The Power of Saving Early
Save early and regularly. Then watch your money grow!
If you start at age 21 with $1,000 and add $50/month until you’re 55, you’ll end up with $120,373!
You contributed only $21,400. The remaining $98,793 is interest. You didn’t have to lift a finger for it. Sweet deal! Imagine if you saved even more monthly!

12. Expenses Expense: A cost to meet a need or pay a debt
Types of expenses
Fixed
Variable
Discretionary

13. Fixed Expenses A cost that occurs regularly and doesn’t vary in amount
Rent
Mortgage
Car payment
Insurance premium
School loans
Others?

14. Variable Expenses A cost that occurs regularly but may vary in amount
Electricity
Water and Garbage
Telephone
Gasoline
Groceries
Others?

15. Discretionary Expenses
A cost determined by personal wants that may be controlled
Movies, videos, CDs
Sports
Eating out
Grooming and clothes
Concerts and plays
Vacations
Others?

16. Safe Percentages
The percentages shown below represent guidelines for safe amounts for major budget items. These are guidelines. You may choose to adjust these, but remember, if you spend 80% of your income on housing, you’ll be eating lots of Top Ramen during the month!
10% Saving
8% Misc.
7% Credit Payments
5% Health
28% Housing
20% Transportation
6% Clothing
16% Food

17. Budget Basics Summary Establish a budget with the following:
Income
Savings
Expenses
Fixed
Variable
Discretionary
End up with a budget surplus and you’re a success!
Set your priorities. What do you want to accomplish with your money?