2. Budg eting Introduction to Business & Technology

3. What is a Budget?  A plan for spending and saving money  Most people think budgets are:  Rigid and inflexible  Painful – who wants to eat Top Ramen every night!  No fun! “A budget takes the fun out of money” – Mason Cooley

4. Why Budgets Make Sense  Budgets help you:  Set priorities  Achieve what’s important to you  A good budget is:  Realistic  Ongoing  Clear and easy to use

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

6. Income: Money Earned  Gross income: An individual’s income before taxes.  Net income: Income after taxes are paid.  Taxes-  Georgia state taxes can range from 1-6% depending on your income  Federal Taxes also vary by income and can range from 10-39.6%

7. Taxes and Deductions Say your first job pays $30,000/year:  Your salary is your gross income (30,000). Take off at least 25% for taxes and other deductions to find your net income. That’s what’s left for you to spend.  Example: Gross salary = $30,000 Minus 25% taxes and deductions- 7,500 Net income $22,500

8. Savings: Pay Yourself First  Savings- unspent income Types:  Emergencies: Plan to set aside three months’ living expenses  Long-term: Large ticket items (house, car, college)  Retirement: It’s never too early to start  Short-term: Vacation, clothes, new skis “When it rains, it pours- make sure you save for the rainy day,” Anonymous

9. Interest on Savings Accounts  Interest: when you save your money in a savings account with a bank, they will pay you with interest. They are paying you because:  1) It is incentive to use their banking services  2) They use your money for capital and investments  Interest rates are a percentage of the money that you get back based on the amount you invest with the bank; so the more you put in, the more money you get back. These rates vary from bank to bank.

10.  “CD”- an agreement that locks your money into an account that you cannot access for a set amount of time, but a bank will give you a higher fixed interest rate for compensation. A CD…  1.) Generally lasts for 1-5 years  2.) Cannot be accessed by the depositor (unlike savings accounts)  3.)Has a higher interest rate as opposed to savings accounts Savings: Certificate of Deposit

11. Savings: Stock Investments  Stock- a type of money investment that signifies ownership in a corporation and represents a claim on a part of the corporation’s assets, earnings, and losses. Stocks are usually…  1.) Long term investments  2.) Extremely variable  3.) Not guaranteed (savings accounts & certificates of deposit are guaranteed by our government)

12. Personal Savings Rate Declining  1974 to 1984  10%  1985-1994  Fell to 4.8%  2004  1.8%  2005  -0.5%  2006  -0.7% This is the first time the rate has not been negative since the Great Depression }

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

14. Needs vs. Wants  Needs are essentials:  Food  Shelter  Clothing  Transportation  Wants are extras:  Eating out  Big, expensive house  Shop till you drop  Brand-new or expensive car

15. Fixed Expenses Costs that occur regularly and do not vary in amount  Rent  Mortgage  Car payment  Insurance premium  School loans  Others?

16. Variable Expenses Costs that occur regularly but may vary in amount :  Electricity  Water and Garbage  Telephone  Gasoline  Groceries

17. Ways to Reduce your Grocery Bill  Make a shopping list  Study grocery ads  Buy store-brand products  Avoid impulse purchases  Learn the basic prices of your favorite foods.

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

19. Budget Summary  Establish a budget:  Income  Savings  Expenses  Fixed  Variable  Discretionary  End up with a budget surplus and you’re a success!