Budgeting and Finance

Introduction to Business and Technology

Describe situations that may occur as a result of

poor budgeting.

Bell Ringer:

Be prepared to share your answers with the class

GPS Focus Standards• BCS-BE-26: The student explains the process in

developing a budget.

• BCS-BE-27: The student analyzes the financial statements of a business and utilizes those statements to make important business decisions.

• BCS-BE-28: The student identifies financial aspects associated with opening a business.

• BCS-BE-29: The student completes records which are fundamental for any business.

Essentials Questions• How can a budget increase your profits?

• What documents do you need to make wise decisions concerning the financial health of your business?

• How much does it cost to open a business? from where do those numbers come?

• Why are your bank records and credit report so important?

• How do you maintain a good credit score?

Budgeting TechniquesLesson Objectives: Identify the purpose of a budget

Describe steps for preparing a budget Describe characteristics of a successful budget

Budget

A plan for managing income and expenses over a certain period of time.

Purpose of Budgets Live within your income. Make wise buying decisions. Avoid credit problems. Plan for financial emergencies.

Develop money management

skills Achieve your financial goals.

The Budget Process1. Set Financial goals -

What do you want to achieve?

2. Plan Budget Categories

3. Maintain financial records

4. Evaluate your budget

1. Set Financial GOALS:

(Affect what we spend our $$ on!)

Short-Term Goals

Long-Term Goals

SMART Approach

SMART ApproachS Specifi c Make the goals specific so you know

exactly what you want to achieve

M Measurable Make the goals measurable so that you know the specifi c amount to save

A Action-oriented

Make the goals action-oriented so that you know what actions you need to take

R Realistic Make the goals realistic based on your income

T Time-based Make the goals time-based so that you have a time f rame for achieving them

SMART Goal Example

I will save $100/month for 18 months from my part-time job to purchase a car by July 31, 2014.

Specific-purchase a carMeasurable-$100/monthAction-oriented-I will saveRealistic-from my part-time jobTime-based-July 31, 2014

2. Plan Budget Categories

Income Paycheck Allowance Scholarships Borrowed

Money Revenue

Expenses Needs Wants

Savings

Two Types of Expenses

Fixed

Variable

Fixed Expenses

RentMortgage payments Insurance premiums

Costs that occur on a regular basis and are the same amount each time

Variable Expenses

Food ClothingUtilities i.e., telephone, electricity, water

Costs that differ each time and may not be as easy to estimate

Personal Budget Categories

SavingsFood ClothingHousehold

TransportationHealth and personal careRecreation and EducationGifts and contributions

Allowance

The amount of money you plan to use for a certain budget category

3. Maintain financial records

Record income and expensecheckbooks, bank statement

Prepare an income and expense summaryspreadsheets, budgeting software

4. Evaluate Your Budget Budget variance - difference

between actual spending and budgeted amount

Deficit - Actual spending is greater than budgeted amount

Surplus - Actual spending is less than budgeted amount

Characteristics of an Effective Budget

Realistic – reflect current income and planned spending Flexible – adaptable to unexpected expenses Regular evaluation – every few

months Well planned and clearly communicated – involve all family members Simple format – user friendly

Review Questions

1. Which of the following is an example of a fixed cost?a.clothingb.accessoriesc.car paymentd.entertainment

Review Questions

2. Which of the follow is an example of a variable cost?a.rentb.insurance premiumsc.water billd.mortgage payment

Review Questions3. A major purpose of a budget is

to:a.assist with comparison

shoppingb.achieve financial goalsc. reduce a person’s enjoyment

of lifed. gather data for using credit

cards

Review Questions 4.The most uncertain aspect of

the budgeting process involves:a.estimating variable expense b.determining net worthc.estimating fixed expensed. setting financial goals

Review Questions 5.The following is a

characteristic of an effective budget:a.should be written in ink b.limited to one pagec.should not changed. should be evaluated

regularly