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THE MAIN IDEA
Meeting your financial goals requires
you to know your income and
expenses. A budget can enable you to
track your spending and make choices
about your money.
THE IMPORTANCE OF BUDGETING
Money management is necessary for
consumers, businesses, and governments.
A budget helps people set financial
priorities.
A budget is a recording of
Your expected income
Your expected expenses
Your planned savings
THE IMPORTANCE OF BUDGETING
Consumers, businesses, and
governments must figure out how to
utilize their income.
Most people want more goods and
service than they can afford
Budgeting helps you set priorities
AVERAGE HOUSEHOLD EXPENSES
If a family earns $3,000 a month, how much money would they likely spend on housing?
PREPARING A BUDGET
There are 7 steps in preparing a budget
1. Set Your Financial Goals
2. Estimate Your Income
3. Budget for Unexpected Expenses and
Savings
4. Budget for Fixed Expenses
5. Budget for Variable Expenses
6. Record What You Spend
7. Review Spending and Saving Patterns
STEP 1: SET YOUR FINANCIAL GOALS
As you prepare to set your financial goals,
you should consider several questions.
What do I want to accomplish in the next month, year, five years?
What is important to me?Are my goals practical?
You might find it helpful to separate your
goals into short-term, intermediate, and
long-term goals.
STEP 2: ESTIMATE YOUR INCOME Start your budget by recording your
estimated income for the next month. Include all sources of income that you know
you will receive Your gross pay is reduced by various
deductions. Deductions include:
Taxes InsuranceRetirement contributions
Your take-home pay (after deductions) is called your net pay
STEP 3: BUDGET FOR UNEXPECTED EXPENSES AND SAVINGS
You have to plan for expenses such as
food, rent, and clothing to satisfy your
basic needs
Unexpected expenses include medical
visits or accidents
Savings make it possible for you to meet
future wants and needs
STEP 3: BUDGET FOR UNEXPECTED EXPENSES AND SAVINGS
In your budget, make sure that the
total income figure is the same as
the total for planned expenses and
savings.
If your planned expenses and
savings are more than your
income, you will have to cut
expenses or find additional income
I WISH!!!
STEP 4: BUDGET FOR FIXED EXPENSES
Expenses that occur regularly
Fixed Expenses include:
Rent
Insurance
Car loan
STEP 5: BUDGET FOR VARIABLE EXPENSES
Expenses that change and can be
controlled more easily that fixed
expenses
Variable expenses include:
Food
Phone charges
Entertainment
Gifts
STEP 6: RECORD WHAT YOU SPEND
Keeping track of your expenses will
help you revise your budget if
necessary.
The budget variance is the
difference between your budgeted
amount and the actual amount you
spend
It can be a surplus (extra money)
or a deficit (not enough money)
STEP 7: REVIEW SPENDING AND SAVING PATTERNS
You need to review your budget each
month and consider making changes.
ASSIGNMENT
Think about what your financial goals are.
Do you want to go to college, buy a car
or go on a school trip? Write a 300 word
essay that explains how making a
budget can help you reach you goals.
How do you plan to save up enough
money to reach your goals?