1. © Family Economics & Financial Education – May 2005 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Developing a Spending Plan Take Charge of Your Finances Family Economics and Financial Education

2. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Introduction  Spending Plans  Income and Expense  Fixed & Flexible Expenses  Net Loss & Gain  Spending Plan Process

3. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Spending Plan  A spending plan is a tool individuals can use to assist money management.  Financial Statement  Assists in money management  Estimate of income and expense over time  Important positive uses:  Understanding where money is going  Tracking income and expense  Helps to meet financial goals  Helps people live within their income  Reduces the need for using credit

4. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona The Costs Add Up ItemAverage Yearly Expense Daily Latte at $2.50 Eating lunch out 5 days per week at a cost of $5.00=$10.00 each time Daily can of soda or chips at $1.00 each Daily candy bar at $1.00 Daily can of chew or pack of cigarettes at $3.79 Weekly attendance at a sporting event with $3.50 admission and $5.00 for snacks Monthly haircut at $25.00 per month Monthly movie and popcorn for two at $20.00 Monthly gym membership at $38.00 Do not let money fly away! By creating a spending plan, a person can realize everyday expenses, reduce these expenses, and increase current income. Beginning at age 15, if a person saved $547.50 per year by not having a can of soda everyday, they would have $105,504 extra to retire on at age 50 with a 8.5% interest rate compounded yearly. $912.50 $1,300.00-$2,600.00 $365.00 $1,383.35 $442.00 $300.00 $240.00 $456.00

5. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Income & Expense  Spending Plans have two main components  Income  Money Earned  Expense  Money Spent  Fixed Expenses  Flexible Expenses

6. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Income  Income is money earned from:  Tips  Wages or salaries  Withdrawal of money from savings  Interest from savings accounts, or investments  Monetary gifts  Scholarships

7. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Expense  Money Spent  Fixed Expenses  Same amount paid each time, usually has a specific due date  Rent/Mortgage  Difficult to change in short amount of time  Flexible/Variable Expenses  Different amount paid each time, usually no specific due date  Clothing  Easier to change in short amount of time

8. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Spending Plan Activity  Decide if each item is income, a fixed expense, or a flexible expense  Indicate a response by holding up the corresponding game card

9. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Spending Plan Activity Rent Fixed Expense Wages Income

10. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Spending Plan Activity Groceries Flexible Expense Internet Bill Fixed Expense

11. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Spending Plan Activity Tips Income Utilities Fixed Expense

12. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Spending Plan Activity Gift from Family Income Savings Fixed Expense

13. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Spending Plan Activity Automobile Registration Fixed Expense Eating Out/Snacks Flexible Expense

14. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Spending Plan Activity Scholarships Income Hobbies Flexible expense

15. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Net Loss & Gain When finished with the spending plan two outcomes are possible:  Net Loss  More expenses than income  An individual needs to increase income or decrease spending  Net Gain  More income than expenses  Ideal situation  Extra money can go into savings, be invested, or spent

16. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Spending Plan Process  Six steps in the spending plan process 1. Set Financial Goals 2. Organize 3. Decide 4. Implement 5. Control 6. Evaluate

17. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Step 1: Set Financial Goals  Financial Goals should be:  Specific: exactly what is to be done with the money;  Measurable: write the exact dollar amount;  Attainable: how will the goal be reached - determined by budget;  Realistic: Do not set the goal for something unattainable or unrealistic;  Time Bound: specifically state when the goal needs to be reached.

18. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona An example of a Financial Goal ¨ To save $5,000 for a car down payment, I have to deposit $208 into my savings account each paycheck for 2 years.

19. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Step 2: Organize  Determine the appropriate way of record keeping  Select categories for the spending plan  Select a time period  Usually when paychecks are received  Weekly  Bi-weekly  Monthly

20. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Step 3: Decide  Make realistic decisions and estimates for categories  If expenses exceed income,  Earn more income  Decrease expenses  A combination of both

21. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Step 4: Implement  Put spending plan into effect  Keep accurate records of all income and expense  Income is usually constant  Keeping track of expenses is the most important!

22. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Step 5: Control  Control systems are ways that a person can keep accurate records of spending  Realize potential problems early if spending too much in one area  Control systems occur simultaneously with implementation  A person should keep a credit spreadsheet which logs all credit transactions (charges and payments for each creditor)

23. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Types of Control Systems  Envelope System  Individuals place actual budgeted cash in a labeled envelope for a certain expense  Each time $ is taken out of an envelope, write down amount and place receipt inside  Move money around to meet expenses  Once cash is gone, its gone and there is no more money in that category

24. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Types of Control Systems  Spending Plan System  Track expenses on a sheet by entering amount  Keep daily to know how much is being spent  Check Register System  Tracks all expenditures in a checkbook register  Divided into spending plan categories

25. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona Step 6: Evaluate  Determine if previous steps in spending plan process have worked  Compare estimated amounts to actual amounts  Have goals been met?  Were there major balances or deficits?  Make necessary changes to spending plan  A continual process because financial situation is always changing!

26. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona THE END!

27. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona

28. 1.15.2.GI © Family Economics & Financial Education – May 2008 – Spending Plan Unit – Developing a Spending Plan Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona