1. Chapter © 2010 South-Western, Cengage Learning Budgets and Financial Records 8.1 8.1Budgeting and Planning 8.2 8.2Legal Agreements and Record Keeping 8

2. © 2010 South-Western, Cengage Learning SLIDE 2 Chapter 8 Learning Target: Explain the purpose/benefits of understanding and utilizing financial planning. Create a personal budget.

3. © 2010 South-Western, Cengage Learning SLIDE 3 Chapter 8 Financial Planning Basics Helps us…. Plan Budget Keeping good records A financial plan is a set of goals for spending, saving, and investing the money your receive.

4. © 2010 South-Western, Cengage Learning What is a Budget? A list (typed or written) of what you will or expect to spend your money on A tool utilized to help individuals stay out of financial trouble Something everyone should create, monitor and update for themselves on a monthly basis

5. © 2010 South-Western, Cengage Learning What does a Budget compare? INCOME EXPENSES (Fixed – Variable) Giving us a “MONTHLY TOTAL”

6. © 2010 South-Western, Cengage Learning SLIDE 6 Chapter 8 Monthly Budget Fixed expenses are costs that do not change from month to month. Variable expenses are costs that vary in amount and type, depending on the choices you make.

7. © 2010 South-Western, Cengage Learning SLIDE 7 Chapter 8 Getting Started Income = money coming “IN” Gross Income Net Income Disposable income $ you don’t have “earmarked” Money Going “OUT” Expenses = money going “OUT” Bills or Financial Obligations

8. © 2010 South-Western, Cengage Learning SLIDE 8 Chapter 8 Preparing a Budget A budget is a spending and saving plan based on your expected income and expenses. PROS Helps you plan Helps you save money Less Stress Keeps you organized CONS Takes Time

9. © 2010 South-Western, Cengage Learning SLIDE 9 Chapter 8 Steps in Preparing a Budget 1.Estimate your income. 2.Estimate your expenses. 3.Decide how much to save. 4.Select your budgeting tool. 5.Balance your budget.

10. © 2010 South-Western, Cengage Learning SLIDE 10 Chapter 8 Evan Anderson—Budget for September IncomeExpenses Part-time job$320Daily lunches$ 80 Allowance20Supplies20 Birthday gift40Clothes40 Total Income$380Entertainment140 Total expenses$280 Savings Credit union account$100 Total expenses plus savings $380 Simple Budget The budget balances.

11. © 2010 South-Western, Cengage Learning SLIDE 11 Chapter 8 Anisa Newkirk January 1, 20— AssetsLiabilities Checking account$500Loan on car$1,800 Savings account800Loan from parents100 Car value3,000Total liabilities$1,900 Personal property5,000Net Worth Total assets$9,300Assets minus liabilities$7,400 Total liabilities and net worth$9,300 Net Worth Statement These two numbers must be the same.

12. © 2010 South-Western, Cengage Learning SLIDE 12 Chapter 8 Personal Records Good personal records makes budgeting and long- range planning easier. Your records also make it easier to prepare income tax returns, credit applications, and other financial forms. You should keep five types of personal records: Income and expenses records Net worth statement Personal property inventory Tax records Other miscellaneous documents

13. © 2010 South-Western, Cengage Learning SLIDE 13 Chapter 8 Income and Expenses Records Examples of income records W-2 forms Statements from banks Statements from investment companies Examples of income records Receipts listing charitable contributions Medical bills Receipts for work-related expenses

14. © 2010 South-Western, Cengage Learning SLIDE 14 Chapter 8 Net Worth Statement A net worth statement shows a person’s net worth based on his or her assets and liabilities. Assets are items of value that a person owns. Money or debts you owe to others are called liabilities. When you subtract your liabilities from your assets, the difference is known as net worth. Assets – Liabilities = Net worth

15. © 2010 South-Western, Cengage Learning SLIDE 15 Chapter 8 Personal Property Inventory A personal property inventory is a list of the valuable items you own, along with their purchase prices and approximate current values. Vehicle Camper/Boat Bike Clothing Furniture Appliances Lawnmower Tools Keepsakes

16. © 2010 South-Western, Cengage Learning SLIDE 16 Chapter 8 Personal Property Inventory Anisa Newkirk: January 2, 20— Item Year Purchased Purchase Price Approximate Current Value Sphinx XTL DVD Player with big-screen TV2008$ 3,200$1,300 Bedroom furniture (bed, dresser, lamp, clock)20062,0001,200 Clothing, jewelry------3,000500 MBD motor bike20051,8001,000 CD collection, CD burner, digital camera, scanner20062,0001,000 $12,000$5,000 (continued)

17. © 2010 South-Western, Cengage Learning SLIDE 17 Chapter 8 Tax Records All taxpayers should keep copies of their tax records for at least three years after they file their tax return. Tax records Tax Return itself W-2 forms Any receipts verifying income and expenses that was listed on the tax return. NOTE - Keep your tax records in a safe place in case of an audit.

18. © 2010 South-Western, Cengage Learning SLIDE 18 Chapter 8 Other Miscellaneous Documents Lists of credit card numbers Car titles Insurance policies Birth certificates Marriage certificates Passports

19. © 2010 South-Western, Cengage Learning SLIDE 19 Chapter 8 Personal Record Keeping As you begin to accumulate financial records and legal documents, you should have a good filing system. A filing system allows you to: Organize Store Retrieve

20. © 2010 South-Western, Cengage Learning SLIDE 20 Chapter 8 Paper Filing System Folders Labels File cabinet

21. © 2010 South-Western, Cengage Learning SLIDE 21 Chapter 8 Electronic Record Keeping The advantages of computerized systems include the following: Ease of updating information Ease of record storage and retrieval Speed of making new computations and comparisons

22. © 2010 South-Western, Cengage Learning SLIDE 22 Chapter 8 Software Programs Many software programs can help you keep better records. A spreadsheet is a computer program that organizes data in columns and rows and can perform calculations using the data. A database is a computer program that organizes data for easy search and retrieval.