1. Spending Plans “Take Charge of Your Finances” Advanced Level

2. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Where’s My Dough? What expenses do you have? How much do you spend on each expense? Play dough = income Divide your play dough to show how much is spent on each expense Write a personal financial goal Based upon your current spending, is it realistic to achieve your goal? Adjust your play dough to reach your goal You have begun to develop a spending plan!

3. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona What is a Spending Plan? Spending Plan for: Time Period: Planned Amount Actual Amount Income Earned Income Wages or salary before deductions Unearned Income Money from savings and investments to help pay expenses during this time period Received Income from Government Programs Total Income$ $ Expenses Deductions Often Taken from Paychecks Contributions to retirement programs (401k, 403b, pension, IRA) Federal income tax and state income tax Social Security and Medicare Saving and Investing (Pay Yourself First) Contribution to savings and investments Insurance Premiums Health, automobile, home or renters, life Housing Costs Transportation Costs Food Costs Family Member Care Communication and Computers Telephone landline, cell phone, Internet, cable/satellite television Medical Costs Not Covered by Insurance Clothing and Personal Care Educational Expenses Pet Care Entertainment Gifts and Charitable Contributions Credit Costs Student loan, credit card, other loan payments Total Expenses$ $ Net Gain or Net Loss (Income less Expenses)$ $ Document used to record both planned and actual income and expenses over a period of time A budget

4. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Money Management Tools Statement of Financial Position Income & Expense Statement Spending Plan What is my financial position today? What is my future money management plan? How have I managed my money in the past? Make changes Determine what changes to make

5. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona A forward-looking Income and Expense Statement May use the same template for both the Income and Expense Statement and the Spending Plan

6. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Why is a Spending Plan an important part of financial planning? Analyze the opportunity costs of your trade-offs to maximize financial well- being Helps set and reach goals Help manage your money in a positive manner Increase net worth

7. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Congratulations! You have been hired as a financial advisor for John and Tia Brown Financial Advisor InformationYour Job Developed a Statement of Financial Position and Income and Expense Statement Identified the following goals: Develop a spending plan for the Brown family Increase the amount of their emergency savings fund Spend less money on clothing every month Pay more on their monthly car loan payment to pay the loan off faster Spend less money dining out at restaurants

8. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Spending Plan Development Process Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments Develop the spending plan Maintain the spending plan

9. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Track Current Income and Expenses Completed by developing an Income and Expense Statement Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments Ensures spending plan is realistic

10. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona The Brown Family Step One: Track Current Income and Expenses Income and Expense Statement for:John and Tia Brown Time Period:January Amount Income Earned Income Wages or salary before deductions5500.00 Total Income $5,500.00 Expenses Deductions Often Taken from Paychecks *Contribution to a retirement program (401k, 403b)385.00 *Federal income tax1,100.00 *Social Security317.13 *Medicare74.17 Saving and Investing (Pay Yourself First) Contribution to savings and investments250.00 Insurance Premiums *Health insurance, Medicaid and Medicare250.00 *Renters or homeowners insurance15.00 *Automobile insurance70.00 Housing Costs *Housing payment (rent or mortgage)800.00 *Utilities (gas, electricity, water, garbage)100.00 Transportation Costs *Automobile payment200.00 *Fuel (gasoline/diesel)100.00 *Automobile repairs and maintenance50.00 *Public transportation fees50.00 *Automobile license and registration (yearly fee)20.00 Food Costs Food at the grocery store300.00 Meals at restaurants350.00 Snacks away from home (coffees, treats)30.00 Non-food kitchen supplies (plastic wrap, dish soap)30.00 Communication and Computers *Cell phone110.00 *Internet60.00 *Cable/satellite television40.00 Medical Costs Not Covered by Insurance *Medical care100.00 Clothing and Personal Care Clothing250.00 Personal care (shampoo, haircuts, cosmetics, laundry, etc.)150.00 Entertainment Movies, books, and other entertainment200.00 Total Expenses$5,401.30 Net Gain or Net Loss (Income less Expenses)$98.70 Financial Advisor Information Your Job Kept all receipts for the month of January to create an Income and Expense Statement Review John and Tia’s January Income and Expense Statement for a realistic view of their income and expenses

11. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Personalize Your Spending Plan Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments How will you develop a spending plan? What is the intended time period for your spending plan? What categories will your spending plan include?

12. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona How will you develop a spending plan? Any written method that works for you How would you develop a spending plan? Paper and pencil Spreadsheet Money management computer software Applications

13. 1.15.2.G1 © Family Economics & Financial Education –May 2011– Insurance Unit – Types of Insurance– Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona What is the intended time period for your spending plan? What categories will your spending plan include? Usually concurrent with pay period Reference tracking from the Income and Expense Statement Do any categories need added, changed, or removed? What time period would you choose for your spending plan?

14. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Income and Expense Statement for: John and Tia Brown Time Period:January Amount Planned Amount for February Income Earned Income Wages or salary before deductions5500.00 Total Income $5,500.00 $ Expenses Deductions Often Taken from Paychecks *Contribution to a retirement program (401k, 403b)385.00 *Federal income tax1,100.00 *Social Security317.13 *Medicare74.17 Saving and Investing (Pay Yourself First) Contribution to savings and investments250.00 Insurance Premiums *Health insurance, Medicaid and Medicare250.00 *Renters or homeowners insurance15.00 *Automobile insurance70.00 Housing Costs *Housing payment (rent or mortgage)800.00 *Utilities (gas, electricity, water, garbage)100.00 Transportation Costs *Automobile payment200.00 *Fuel (gasoline/diesel)100.00 *Automobile repairs and maintenance50.00 *Public transportation fees50.00 *Automobile license and registration (yearly fee)20.00 Food Costs Food at the grocery store300.00 Meals at restaurants350.00 Snacks away from home (coffees, treats)30.00 Non-food kitchen supplies (plastic wrap, dish soap)30.00 Communication and Computers *Cell phone110.00 *Internet60.00 *Cable/satellite television40.00 Medical Costs Not Covered by Insurance *Medical care100.00 Clothing and Personal Care Clothing250.00 Personal care (shampoo, haircuts, cosmetics, laundry, etc.)150.00 Entertainment Movies, books, and other entertainment200.00 Total Expenses$5,401.30$ Net Gain or Net Loss (Income less Expenses)$98.70$ The Brown Family Step Two: Personalize Your Spending Plan Financial Advisor Information Your Job Requested a spending plan for the month of February Requested the same document and categories as the Income and Expense Statement Find the column on the Income and Expense Statement where the Spending plan will be created

15. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Allocate Money to Each Category Reference tracking from Step One Determine what changes to make Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments

16. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona When allocating money consider: ContractualNon-contractual Trade-offs and opportunity costs Goals Contractual expenses Required to pay expense for a specific amount of time - not easy to reduce or eliminate Easy to reduce or eliminate Rent, Internet, Cell phone Food, entertainment

17. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Spending Plan Guide What variables may cause these percentages to be different?

18. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Net Gain or Net Loss? IncomeExpenses Net Gain or Net Loss Net Gain?Net Loss? Add more money to savings or another expense Increase income Decrease expenses Both

19. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona The Brown Family Step Three: Allocate Money to Each Category Financial Advisor Information Indicated a * next to expenses that are either contractual or they are unwilling to decrease Remember goals Consider trade-offs Must have a net gain or a zero balance

20. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona The Brown Family Step Three: Allocate Money to Each Category Your Job Develop a spending plan for the family Explain each change made Re-write goals into SMART goals using their new spending plan

21. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Implement and Control Make your planned spending decisions Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments Use a control system to stay on track

22. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 22 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Control Systems Money management computer software Which control system would help you stick to your spending plan? Internet-based spending plan program Depository institution programs Check register system Envelope system

23. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 23 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona The Brown Family Step Four: Implement and Control Your Job Recommend a control system for John and Tia

24. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 24 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Evaluate and Make Adjustments How well did your spending plan work? Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments Is your spending plan helping you reach goals? Do you need to make any adjustments?

25. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 25 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona The Brown Family Step Five: Evaluate and Make Adjustments How could creating a spending plan help you now and in the future? Financial Advisor Information Your Job John and Tia realized that if they dine out at restaurants less often they will need to increase their monthly grocery expense Increase their grocery budget by $20.00 How has developing a spending plan helped the Brown family?

26. 1.15.2.G1 © Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 26 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Summary A spending plan is an important financial planning tool ▫ Helps achieve goals Make your spending plan work for you Make sure to control, evaluate, and adjust your spending plan Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments