Financial Financial Fitness ProgramFitness Program

Financial Planning and

Money Management

Key PointsKey Points

Importance of financial planning

Steps in financial planning

How to set and achieve goals

Financial health and net worth

Key PointsKey Points

Overview of money and marketplace

Wants versus needs

Consumer pitfalls

Key PointsKey Points

Managing income and spending

Tracking expenses

Creating a spending plan

Why Plan Your Finances?Why Plan Your Finances?

To set goals and priorities

To learn how finances work in your life

To make wise consumer decisions

To save money for big purchases

To establish credit and use it wisely

Why Plan Your Finances?Why Plan Your Finances?

To track where your money is going

To help you live within your income

To show you where to cut spending

To spend money without feeling guilty

To create a way to measure your progress

Why Plan Your Finances?Why Plan Your Finances?

To avoid financial setbacks

To avoid consumer scams

To invest for the future

To buy a home

Steps in Financial PlanningSteps in Financial Planning

1. Assess needs

2. Set goals

3. Make a plan

4. Take action

5. Review progress

SMART Goal SettingSMART Goal Setting

Specific

Measurable

Attainable

Relevant

Time-related

Goal SettingGoal Setting

Short-term goals <1 year

Mid-term goals 1-5 years

Long-term goals 5+ years

Barriers to Achieving GoalsBarriers to Achieving Goals

Lack of resources

Lack of skills

Shortage of time

Unexpected expenses

Financial Health: Net WorthFinancial Health: Net Worth

Assets What you own in property and savings

Liabilities What you owe

Net Worth Assets - Liabilities

Warning Signs of Financial Warning Signs of Financial ImbalanceImbalance Relying heavily on credit cards for

new purchases Living paycheck to paycheck No savings or investment plan No assets (except a car) No reserves for emergencies Can’t afford a vacation

Warning Signs of Financial Warning Signs of Financial ImbalanceImbalance No retirement plan Lost track of how much you owe Don’t know your checkbook balance No plans for the financial future

How Did You Learn about How Did You Learn about Money?Money?

From parents and family

From friends

From co-workers

From media

From own experiences

Time Is MoneyTime Is Money

Annual income

1 minute worth

1 hour worth

1 hour/day for 1 year worth

1 hour/day for 30 yrs. worth

$10,000 $.0852 $5.12 $1,250 $37,500

$20,000 $.1708 $10.25 $2,500 $75,000

$30,000 $.2561 $15.37 $3,750 $112,500

$40,000 $.3415 $20.49 $5,000 $150,000

Common Advertising Common Advertising TechniquesTechniques Status/Hero Endorsement Peer Approval Physical Attraction Entertainment Dangling Comparisons Catch Phrases and Slogans

Common Sales TechniquesCommon Sales Techniques

Coupons and rebates

Package deals

Loss leaders

Free gifts

Contests

Common Sales TechniquesCommon Sales Techniques

Bait and switch

High pressure

Inside groups and clubs

Going out of business sales

Spending Personalities

Impulsive Buyer buys on a whim

Fanatical Saver focused on saving

Passive Buyer uncomfortable

Avoidance Shoppershops to relax

Spending Personalities

Esteem Buyer label-conscious

Overdone Buyer addicted to shopping

Hot Potato Buyer worries about decisions

Spending Choices

Need Something you must have to survive

Want A way to satisfy needs with a higher level of

comfort, ease or style

Smart ShoppingSmart Shopping Plan at home

Make a shopping list

Decide on quality

Comparison-shop

Negotiate for the best deal

Take your time

Tips for Being a Wise Tips for Being a Wise ConsumerConsumer Don’t shop on payday Don’t shop when you’re tired Don’t shop for food when you’re hungry Take your time You don’t have to buy it today Nothing is a bargain unless you need it Have a spending plan and stick to it No one can make you buy anything

Consumer RightsConsumer Rights

To safety To be informed To choose To be heard To consumer education To service

Consumer ResponsibilitiesConsumer Responsibilities

To use products correctly To seek information before purchase To comparison shop To report unfair business practices To speak out To take advantage of educational offers To be a courteous and responsible

consumer

Consumer PitfallsConsumer Pitfalls

Paycheck Advancement Companies

Rent-to-Own Companies

Predatory Lenders

Check-Cashing Outlets

Pawn Shops

Local ResourcesLocal Resources

Local NeighborWorks Organization Better Business Bureau Legal Aid Society Consumer Credit Counseling Services

Why Budget?Why Budget?

Puts you in control of spending and saving

Helps you set priorities and make decisions

Helps you live within your means

Protects your credit rating

Helps you maintain savings and investments

Helps to you teach your children about money

Why Budget?Why Budget?

Prepares for large expenses

Identifies wasteful spending

Keeps control of financial future

Encourages savings

Helps to accomplish goals

10 Basic Rules of Money 10 Basic Rules of Money ManagementManagement

1. Plan

2. Set financial goals

3. Know your financial situation

4. Develop a realistic spending plan

5. Don’t allow expenses to exceed income

10 Basic Rules of Money 10 Basic Rules of Money ManagementManagement6. Save

7. Pay bills on time

8. Determine wants versus needs

9. Use credit wisely

10. Keep record of daily expenditures

Money Management TipsMoney Management Tips

Money management must be learned Money management must be

practiced Money management must include

everyone in the household Money management requires effort

What Does a Spending Plan What Does a Spending Plan Show?Show? What money is coming in the near

future How much you spend on basic needs How much you need to set aside for

periodic or unexpected expenses What is left over for wants or goals

Steps for Developing A Spending Steps for Developing A Spending PlanPlan Calculate net monthly income

Add up monthly living expenses

Determine your budget

Monthly Income – Expenses= Savings

Tracking Income and ExpensesTracking Income and Expenses

Pay stubs Check registers Check stubs and cancelled checks’ Receipts Bills and invoices Credit card statements Bank statements Calendars, diaries and pocket notebooks

Types of ExpensesTypes of Expenses

Fixed stay the same each month rent/mortgage payment (eg.)

Variable costs each month that change groceries or utilities (eg.)

Periodic or Unexpected medical bills or taxes (eg.)

Trimming ExpensesTrimming Expenses Clip coupons Use a list to do grocery shopping Shop for store or generic brands Shop in resale stores Eat out less often Pack lunches for work and school Use public transportation when possible Trade services with friends Find fun activities that are free

Trimming ExpensesTrimming Expenses Make cost comparisons fun Get three quotes for large purchases Agree on allowance for each family

member

Spending Plan TipsSpending Plan Tips

Plan according to current income Plan ahead for six months Include spending money for all Keep record-keeping simple Set money aside for maintenance Get consensus from entire family Pay yourself first

Review the PlanReview the Plan

Is our budget working?

Are all family members able to follow it?

Which costs always seem to be over budget?

Are we getting closer to reaching our goals?

Ways to Make Budgeting Ways to Make Budgeting EasierEasier Decide who pays bills Know when bills are due Use utilities’ level billing payments or

deferred payment agreements Open a checking account Consolidate credit card accounts Consider selling a car Check interest rates on all of your loans

Ways to Make Budgeting Ways to Make Budgeting EasierEasier

Stick to the plan Carry written reminders of goals with you Carry as little cash as possible Use direct deposit Put items on layaway Buy only what you need Try to pay with cash or check and not

credit

SummarySummaryFinancial planning is a way to help your

money work for youStart with your goalsSeparate your wants from your needsBe a wise consumer and avoid pitfallsMake a realistic spending planRevise your plan when it’s not working for

you