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Chapter 6: Budgeting
• Read each question on the Cosmo Quiz.
• Total up your answers• Determine how you manage your
money!
Cosmo Quiz
Cosmo Quiz Scoring
1. a. 5 b. 1 c. 3
2. a. 1 b. 3 c. 5
3. a. 3 b. 1 c. 5
4. a. 5 b. 1 c. 3
5. a. 1 b. 5 c. 3
6. a. 5 b. 3 c. 1
7. a. 5 b. 3 c. 1
8. a. 3 b. 1 c. 5
Scoring Results• 10 – 20 points
You tend to be a bit overcautious with money. You don’t mismanage your money, but you’re not being fair to yourself either. You should treat yourself to something special.
• 21 – 30 pointsYou manage your money wisely. When you receive money, you know exactly what to do with it. You save some of your money and leave some left over for yourself.
• 31 – 40 pointsYou tend to be a bit careless when it comes to managing money. Money burns a hole in your pocket. You need to learn to be a little more conservative with the money you receive. You will soon find that your finances will fall into place.
• Write down 3 short term spending goals you have (within 6 mo- yr)
• Write down 3 long term spending goals you have (1 yr-more)
Bell Ringer- 03/04/15
• Barenaked Ladies- If I Had A Million Dollars
If I had a Million Dollars
• Read each statement and determine whether you think it is true or false.
• Include some reasoning as to why you came to that conclusion.
Millionaire Questions
• Most millionaires inherit their wealth.• False—About 80 percent of millionaires
are first-generation affluent.
• Most millionaires earn more than $500,000 per year.
• False—Less than 15 percent of millionaires have income over $500,000 per year.
Millionaire Answers
• College graduates earn much more than high school graduates do.
• True----fact, according to 2007 Census Bureau statistics, the average college graduate earned 78 percent more than the average high school graduate. People with professional degrees earned 255 percent more than high school graduates.
Millionaire Answers
• People who are self-employed usually become millionaires.
• True—More than half of the millionaires are self-employed.
Millionaire Answers
• All millionaires wear expensive clothes.
• False—Fifty percent of millionaires have never paid more than $400 for a suit; 90 percent of millionaires have never paid more than $1,000 for a suit.
Millionaire Answers
• Millionaires usually drive new cars.
• False—Less than 25 percent of millionaires drive a current-year car and more than half drive a car that is more than two years old.
Millionaire Answers
• Many millionaires drop out of college to start work.
• False—Four out of five millionaires are college graduates. Eighteen percent have master’s degrees, 8 percent law degrees, and 6 percent Ph.D’s.
Millionaire Answers
• It’s possible to save enough to be a millionaire.
• True—For example, if a 22-year-old saves just $50 per week ($2,600 per year) during his or her entire working life and earns a 9 percent rate of return on the investments, the saver would have more than $1 million by age 63.
Millionaire Answers
Chapter 6.1 Choose Financial Goals
• A plan for dividing income among spending and saving options.
• It can help you achieve more of what is important to you during your life span.
Budget
• First step in budgeting process is to consider important goals you have set in your life-span plan
First Step in Budget Process..
• Short term– Things you hope to achieve within a year– Example: Spending $200 to visit a friend who
moved away– Can be achieved quickly
• Long Term– Things you want to achieve over more than a
year– Example: Pay for a house, college, retirement,
etc.– Saving over time
Short Term Vs. Long Term Goals
• Control short term spending• Saving NOW!!• Spending to satisfy short term
wants can affect your future plans• Evaluate priorities
Balancing Long Term Spending with Long Term Success
• Your actions affect you and your family
• Consider how your goals impact other people in your life.
• Think about what expenses you may have that can affect all of your family members…
Your Goals Affect Others
• Your Current Family– You have a goal of being a computer
programmer– Paying for this degree requires a lot of
money for your education– Most parent help out in getting loans to help
their children– It can take many years to pay off the loan– How might this financial burden affect
your lives?
Your Goals Affect Others
• Future Family– 75% of people marry before 30 yrs old– Your decisions now or in the next few
years can affect the person you marry– By borrowing you trade future spending
for current spending– Borrow Responsibly!
Your Goals Affect Others
• You go to school• Get a job• Earn money• Start a family
• The work you choose to do can benefit many people in your community!
Your Community and Your Goals
• Housing• Transportation• Food • Savings • Entertainment• Insurance/ Medical• Other
• 30%• 20% (car, gas and oil)• 15% (groceries &
rest.)• 10%• 5%• 15%• 5%
Budget Categories
Chapter 6.2: Track Income and Expenses
• Look at the money picture document.• Pick 2 of the “quotes” or
“statements” and explain whether you agree or disagree with the statement.
Bell Ringer 10/9
Income
• Savings Account Interest
• Investment Dividends• Investments• Paycheck• Checking Account
Interest
Expenses
• Auto Insurance• Gas• Hair Care• Home Insurance• Lunches• Property Tax• Car Maintenance • Donations• Student Loan Interest• Rent• Mortgage• Mortgage Interest
Income V. Expenses
Fixed
• Car Insurance• Mortgage• Rent• Renter’s Insurance• Student Loan
Repayment• Car Payment
Flexible
• Gas• Savings• Utilities• Entertainment• Groceries• Hair Care• Investments• Parking• Pet Care• Train Passes• Vacation Fund
Fixed V. Flexible
Housing30%
Trasportation20%
Food15%
Enter-tain-ment5%
Savings10%
Insurance15%
Other5%
Budget Categories
• Money you receive in the form of:– Paycheck– Cash– Gifts– Tips
Income
• Items you spend your income on– Cell phone bill– Rent– Groceries– Cable/Internet
• Income
Expenses
• Labeled file folders– File receipts, check stubs, and notes
about income or purchases
• Computer spreadsheet– Keeps spending organized so you can
plan for vacations, major purchases, and long term expenses
Filing System
• File each record as you receive it–File folder or computer spreadsheet
• Keep all your records in files and all your files in one place!
Record Keeping
• Amounts you are committed to spend and are generally the same amount each month.– Rent/mortgage– Cell phone bill– Cable bill– Car payment
Fixed Expense
• Varies month by month• Amounts you can choose to spend or
not to spend– Clothing– Groceries– Entertainment: movies, concerts,
restaurants
Flexible Expenses
• Goods that have special qualities that make them more expensive then alternative goods.– Sports car vs. A used compact car– (Lexus vs. Toyota)– Coach purse vs. Purse from Kohls
• You must choose among flexible spending options. Prioritize your options!
Luxury Goods
• List your income and expenses
• This tracks where your money goes
• You can use excel as a starting point!
2nd step of budget process
• Advantage–You know how much you have to pay and when you have to pay it!
Fixed Expenses
• Fill in monthly gross pay• Determine net pay using given tax
information–Disposable Income
• Distinguish between fixed and flexible expenses
• How much money do you have left over after your bills have been paid?–Discretionary Income
Budget Activity
• Open your Life Smart Project to Page 3
• Underneath your bell ringer, write down your monthly net pay from your life smart project (found on tax page 3).
• Multiply this amount by 15%
• This is your food budget!
Food Budget
• Brainstorm using the calendar to create a meal plan for the month of March.– Identify breakfast, lunch, dinner, and
snacks.
• List the ingredients you need to complete your meal plans.
Food Budget
1. Use the grocery store ads and grocery price lists to identify the cost of your ingredients.2. Use a calculator to add up your list.
3. Complete the food budget reflection!
Food Budget
• Use price lists to finish project– Total up your prices!
–www.peapod.com (for prices)
• Turn in Food budget Packet & Reflection sheet
Food Budget Project
• List 2 reasons why it is important to budget your expenses.
Bell Ringer- 10/10/13
• Work on the short and long term financial goals tab of your Life-Smart Project– Choose 1 item you want to buy short term
• Search 2 places you can buy this item at• Research Pricing
– Choose 1 item you want to buy long term• Search 2 places you can buy this item at• Research Pricing
03/6/2015
Chapter 6.3: Your Budget Worksheet
• Fill in monthly gross pay• Determine net pay using given tax
information–Disposable Income
• Distinguish between fixed and flexible expenses
• How much money do you have left over after your bills have been paid?–Discretionary Income
Budget Activity
• How to Squeeze a Nickel Article–Write down 3 savings tactics you
think you would be able to do–Write down 2 things you could
absolutely not do–Write 1 savings tactic of your own.
Bell Ringer 03/11
• A planning document on which your income and expenses are listed.
Budget Worksheet
• Sources of income– Expected Amount– Actual Amount– Over or Under
• Fixed Expenses• Flexible Expenses• Savings
Information on Budget Worksheet
• 1. Create a worksheet• 2. Estimate your income– Use NET income!– Estimate uneven income (tips, gifts,
varied income)
5 steps in building a budget
• 3. Estimate Your Expenses and Savings– Plan for uneven expenses • Car insurance, property tax, etc.
– Charitable Giving– Plan your savings• You should save 10% of your Net Pay each
month!• Try not to spend this amount!!
5 steps in building a budget
• 4. Record Actual Income and Expenses– As you spend money, write it down! – Make sure you are also filing receipts in your
file box!
• 5. Calculate the difference– Subtract expected amounts from the actual
amount in each row.– In the over under column, record the
difference
5 steps in building a budget
Chapter 6.4: Create your budget for the year
• Checking your budget for accuracy and to determine whether it is helping you to achieve your goals
Audit
• Can help you plan steps toward major goals that may take many years to achieve– House, retirement, college, etc.
Review Your Budget once a year
• People change overtime• Your goals may be different in 5
years• When your goals change, your
budget should change• A budget is a flexible tool to help you
achieve what you want!
Review to Changed Goals
•How?Budget helps with debt
