1. Warm up Problem Electric Bills: August $131 September $134 October $ 145 November $ 175 December $201 Calculate the average monthly electric bill for the time period described $157.20

2. 3.1, page 159 Homework review 11 -$675 Mortgage 12- No, do not know monthly net income and no savings information is available 13- $41 telephone 14- $443.52 for transportation costs

3. Budgeting -Identify and examine current spending habits and identify the various expenses (difference between needs and wants) associated with living independently

4. Balance is essential for proper financial stability Balance:

5. Key Terms Budget- a financial plan that compiles and compares a person’s income against all of his/her expenses in order to analyze spending and meet personal goals. Income- money coming into a budget (activity 1) Directions: Paper, pencil – fold hotdog style Income and expenses on either side. Examples- part-time job, stipends, allowances, gifts, interest, etc.

6. Where does your money go? Expenses: Give me examples of each…. Categories: Est. of US household expenses 30Housing 18Transportation 16Food 5Clothing 5Medical 5Recreational 5Utilities 8Miscellaneous 4Savings 4Other debts 100 %Total

7. Needs versus Wants Needs are essential, wants are not Expenses: Fixed versus Flexible Fixed- rent, loan payment, insurance, etc. Flexible – utility bill, groceries, clothing, etc. Discretionary Spending (just flexible, not fixed)- spending money on things you want versus what you need to survive- candy, pop, snacks, movie tickets, late night pizzas, etc. Too much (DS) can be a bad thing, control your excessive spending for a positive cash flow.

8. Cash Flow worksheet A: Monthly Net Income= B: Monthly Flexible Expenses = C: Monthly Fixed Expenses= Add B and C together = A minus B = Total for saving and investing When to save at the end of month or the beginning? What if the bottom number is negative? Living beyond your means.

9. Net Worth Net Worth = Assets – Liabilities Assets = something you own that has positive economic value. Growing your assets has a positive net worth – Examples: savings, stocks, antiques, real estate, houses, etc. Liabilities = something you owe, negative economic value, excessive liabilities can detract from your overall financial plan – Examples: loans, mortgages, auto and credit cards

10. Guide Practice YOU Choose Fixed expense (FE), Variable expense (VE), Discretionary Spending (DS) Magazine or cup of coffee This Months rent Dinner out Cell Phone bill School Books Motorcycle Insurance payment Monthly bus pass Heating Bill

11. Continued Frozen Pizza at grocery store New pair of running shoes Oil change for car New mobile phone (old one still works) New mobile phone (old isn’t working) Personal Loan payment Monthly deposit into savings

12. Written Assessment Exercise Module 2 Handout Groups of 6-7 people List ideas and be prepared to present your budget to the class

13. Closure What do you need to understand to help control excessive spending? Quiz date- _____________