MoneyCounts: A Financial Literacy Series Budgeting Fundamentals Dr. Daad Rizk MoneyCounts: A Financial Literacy Series 240D Outreach Building University

MoneyCounts: A Financial Literacy Series

Budgeting Fundamentals

Dr. Daad RizkMoneyCounts: A Financial Literacy Series240D Outreach BuildingUniversity Park PA [email protected] 814-863-0214

mailto:[email protected]


Learning Objectives

• 5 steps to budgeting– Set up SMART goals– Collect financial information – Track money coming in – Track money going out– Review cash flow and set up a budget


On Budgeting

• Theo's Budget [YouTube]

https://www.youtube.com/watch?v=L7soJdOhKZM

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&uact=8&docid=1ddX_4su6U_hSM&tbnid=9MxkWDH9U6jzwM:&ved=0CAUQjRw&url=http://prettyprovidence.com/budgeting-on-a-budget/&ei=-xyPU--DJemxsATdxIGoBg&bvm=bv.68235269,d.b2k&psig=AFQjCNHvzdJXKk8XdXi0hNT61NmmaaAxMA&ust=1401973839994877


What is Budgeting?Budgeting is the process of creating a plan to spend your money. It is spending less than earning as you plan for your financial goals

How do I allocate my income to pay my expenses?

Where did my money go?

Why am I always broke?

A financial tool to help manage cash flow!

Budgeting is never “ONLY” about money!

What is Budgeting?


Budgeting is simply balancing your expenses with your income.If they don't balance and you spend more than you make, you will have a problem

Many people don't realize that they spend more than they earn and slowly sink deeper into debt

Why is it important?


To meet your financial goals

To achieve financial security

To prevent financial crisis

To get out of financial crisis

Goal is to maintain financial stability in good times and financial sustainability in hard times

An important component of financial success

Adopt a budget prior to financial crisis

When Should you budget?


Step 1 – Start by setting smart goals

Short term & long term goals/personal, educational, social, financial and recreational

– What are my values, my needs, what is my life situation?

– What are my goals, what do I hope to accomplish?

– Before you plan, picture the destination

The Budgeting Process – Step 1


SMART – GOALS

Prioritize goals using the SMART Model

= Specific

= Measurable

= Attainable

= Realistic

= Timely

Goals should be crystal clear in their definition

SMART


Step 2 – Get Organized

Collect Financial Information Pay Stub

Bank Records

Financial Aid Awards Insurance

Tuition and Fees Bills Groceries Receipts

Bookstore Bills Eating Out Receipts

Credit Card Bills Personal

Utility Bills Pets

Electronics Miscellaneous



Step 3 – Money coming in/ Income & Borrowing• Wages, Salaries

• Family Help

• Interest Income

• Other Income

• Grants and Scholarships– Loans

– Perkins

– Subsidized

– Unsubsidized

– Other Loans



Step 4 – Money going out/Saving & Spending

Saving

– At least 10% of net income

– Pay yourself first

– Establish/ keep an emergency fund

– Invest and plan for retirement



Step 4 – Money going out / Saving & Spending

Spending

– Know needs from wants, what are my spending habits? How do I make spending decisions?

– List all spending – Tracking process

Fixed & Variable

» Tuition, Fees, Books

» Housing and Groceries

» Car expenses, Electronics, Insurance,

Eating out, Personal, Pets, etc.

» Periodic expenses, gifts, entertainment,

Charity, etc.





Step 4 – Money going out / Saving & Spending

• Saving is 10% of income – pay yourself first

• Spending• Housing should not exceed 30% of your net income

• Meals and eating out should not exceed 20% of your

net income

• Utilities should not exceed 5% of your net income

• Car expense should not exceed 10% of your net income

• Electronics, phone, Internet should not exceed

5% of your income

• All other expense is 20% of your net income



Balancing Act

– Use Loans only to pay for tuition, fees, & books

– Use income to pay for housing, food, electronics, entertainment, insurance, credit cards, car expense, gas, personal, pets & miscellaneous• Do a monthly budget, use accurate figures/amounts

• Avoid “PILS” Penalties, Interest, Late fees & Surcharges

• Keep a saving account

• Shop based on Needs not Wants

• Pay Credit Card in full each month

• Allow for some fun items, but stick to your budget




Earning and Borrowing• Net income• Family support• Grants and Scholarships• Loans

– Perkins– Subsidized– Unsubsidized

Saving and Spending• Saving, emergency fund• Tuition, fees and books• Housing and utilities• Car expense• Phone, Internet,

electronics, videos• Loan origination fees• Insurance, medical,

entertainment


Recommended Budget as a percentage of Net Income

Income - Cash In 100.00%1. Saving 10.00%2. Housing 30.00%3. Utilities 5.00%4. Food 20.00%5. Transportation 10.00%6. Entertainment 5.00%7. Debt 10.00%8. Other 10.00%

Budget as a % of Net Income


• Budget as a percentage of Net Income

Budget as a % of Net Income


Use a Monthly Calendar

• Use Black color for income • Use Red color for expenses• Helps you visualize the entire month• Helps you evaluate timing of payments• Helps you improve your budget strategies


Tracking Expenses


Budget Worksheets


• financialliteracy.psu.edu/

• Email: [email protected]

Financial Literacy Website!

https://financialliteracy.psu.edu/



Thank You!

Comments and Questions

Dr. Daad RizkMoneyCounts: A Financial Literacy Series240D Outreach BuildingUniversity Park PA [email protected] 814-863-0214


Documents

MoneyCounts: A Financial Literacy Series Budgeting Fundamentals Dr. Daad Rizk MoneyCounts: A Financial Literacy Series 240D Outreach Building University