BUDGETING:FINANCIAL EDUCATION GOAL

L E A R N HO W T

O MA K E

AND K

E E P A B

U DG E T.

BUDGET COMPETENCYDefine and track income and expenses,

using different methods;Develop a “normal” budget;Learn techniques for approaching options

for handling an income shortfall or unexpected expense;

Analyze the cost/benefit of different options.

!GROUP DISCUSSION:

Why do we budget?

WHY BUDGET?Map to reach goals;Tool for making choices;Assess what you have and what you need;Control your own financial resources;Focus on the future.

WHAT DO WE BUDGET?

We control our expenses, butWe budget our income.

Why is that important?

BUDGET TARGETS & PERSONAL GOALSIdentify major long-term goals;Estimate the future cost of each

goal;Determine a realistic timeline to

meet the goal;How much must be saved each

month to reach the goal?

EVERY BUDGET LINE HAS A GOAL ATTACHED.

Is it necessary?How much is needed?When is it needed; how often?What quality is needed?What variables can be changed?Can it be deferred?Include all variables in your budget

calculation.

MAKE THE GOAL SMART.SMART GoalsOne way to make goals simple and clear is to make them SMART. SMART stands for:Specific—focusedMeasurable—you can tell if it’s been achievedAchievable—realisticResults-oriented—written about the end you are trying to get toTimebound—there is a specific time by which the goal will be reachedWhile goals are SMART, they do NOT show how the goal will be reached. The

“how” is the plan. Goals provide the destination and the direction for your plans. So, you can’t make a plan without a goal. This applies to how you get and use your money, too.

A budget is just a plan for how you use your money. You can’t make a budget without having goals.

MAKING YOUR GOALS WORK FOR YOUHere are the steps to figuring out the resources, time and costs to reach your goals:Step 1: Write goals. You’ve already done this!Step 2: List all of the resources you need to reach this goal.Step 3: If money is needed, estimate the amount you will need to

reach the goal. If you don’t know the amount, do some research.

Step 4: Figure out how many months you have to save. Count the months from now until the end time written in your goal statement.

Step 5: Divide the money needed to reach goal by the months to save. This gives the amount you need to save each month. This is what you will include in your budget!

DO THE MATH!Computer spreadsheet,Index cardsNotebookMonthly conversions52 weeks/1226 bi-weekly pay periods/12Quarterly/3Annual/12

GROUP EXERCISE

How Much to Save Each Month

PRIORITIZE YOUR GOALSDon’t be limited by the present.Which goals that you achieve will help

other goals?Pay yourself first! (budget your savings)Examine (record) your use of income:Share it;Save it;Spend it.

WHAT ARE YOUR FINANCIAL RESOURCES?Paycheck :Fringe benefit optionsTaxes withheld (loan to Uncle Sam?)Credit (to increase assets or cut

expenses)Employer savings matchTax credits (EITC)Asset income (rental, business use)Government and grant assistance (loans,

IDA)

SOURCE OF INCOME RECORDSFollowing is a list of different sources of income and the records you may have.Wages (full or part time job): Stub from Check; Deposit slip; Bank Account StatementSelf-Employment Income: Invoices; Receipts for Payment; Deposit Slips; Bank Account StatementBonuses: Stub from Check; Letter from Employer Stating Bonus AmountCommissions: Stub from Check; Copies of Commission Checks; Deposit Slips; Bank Account StatementUnemployment: Notice of Benefits from State Agency; Check Stub or Photocopy of Check from State Department of Labor or Economic SecuritySeverance Payments: Letter from Employer Stating Terms; Deposit Slips; Bank Account StatementChild Support: Statement from State Disbursement Unit; Court Order (states amount of child support and schedule of payments); Deposit Records; Bank Account Statement

MORE SOURCESEarned Income Tax Credit: Tax Return; Deposit Records; Bank Account Statement (if using Direct Deposit); Stub from Check if PaperGift: Deposit Records; Bank Account StatementPublic Assistance (TANF benefits): Notice of Cash Assistance from Local Department of Social Services; Stub from Check; Deposit Records; Bank Account Statement (if using Direct Deposit)Social Security Disability (SSD) and Supplemental Security Income (SSI): Notice of Benefits from Social Security Administration; Stub from Check; Deposit Records; Bank Account Statement (if using Direct Deposit)Social Security Retirement: Notice of Benefits from Social Security Administration; Stub from Check; Bank Account Statement (if using Direct Deposit)Pension: Stub from Check; Bank Account Statement (if using Direct Deposit)Social Security Survivors: Notice of Benefits; Stub from Check; Bank Account Statement (if using Direct Deposit)

WHAT ARE OTHER RESOURCES?Vegetable gardenEducationBarter and tradeCouponsCooking and canningStocking up on salesMaking things last

GROUP DISCUSSION

How can expenses be grouped?(general types of goals)

SIX USES OF INCOME• Fixed Expenses• Credit Card Debt Payments• Occasional Expenses• Savings and Sharing Goals• Flexible Necessities• Discretionary Wants

ENVELOPE BUDGETINGDeveloped for cash and carry economy.Divide paycheck into several envelopes

for different expenses, and take from each envelope as pay that expense.

Similar concept to mortgage escrow for paying taxes and insurance.

Separate accounts may serve this function.

How do you employ method in electronic economy?

BUDGETING TOOLS & RESOURCES• Bank or Credit Union Online• Independent Online System• Quicken or other financial

software• Electronic spreadsheet (Excel)• Paper Calendar or record

ONLINE TOOLS• https://www.pncvirtualwallet.com/ Virtual Wallet

by PNC• Allows 3 PNC accounts (spend, reserve, growth)• $25 minimum deposit• 3 check limit (promotes online transactions)• Budget calendar feature• Online bill pay• Money Bar to move between three accounts

• Finance Works by Quicken (BankAtlantic)• Manage multiple accounts at different institutions• Based on Quicken software functions

ONLINE TOOLS• https://www.hellowallet.com/ Hello

Wallet• Independent financial planning• Budget calendar• Connect to outside accounts• Record account transactions

•http://www.mvelopes.com/ Mvelopes• Add outside accounts (4)• 25 electronic envelopes• Personal coaching sessions

ONLINE TOOLS• https://secure.budgettracker.com

Budget Tracker•Download account information or manual entry•Manage credit cards and loans• Track income• Pay bills •Budget•Manage categories

ONLINE TOOLS• https://pearbudget.com/ Pear Budget

• Need not connect accounts• Simple budgeting• Monthly & irregular expenses• Budget Plan

• https://www.mint.com/ Mint.Com• Connects to accounts• Categorizes expenses• Auto budgets based on history• Shows balance at any time

BUDGET BOOK SPREADSHEET (EXCEL)• Cash Flow Analysis• Budget by Income Period• $0 Net Balance Goal• Be Flexible and Adjust Budget• Consider All Options

SPREADSHEET EXERCISE

Budget Scenario - Margaret

SOLUTIONS – INCREASE INCOME.• Get another job.• Get more education or training.

• Will it increase salary?• What educational debt will it create?

• Start your own business.• Qualify for public benefits:

• Food stamps• Subsidized housing• Free health care

SOLUTIONS – CUT SPENDING.• Eliminate unnecessary expenses.• Review insurance options.• Do it your self.• Cut back on flexible expenses.• Make repairs that reduce expenses.• Look at less expensive options (e.g., different

car).• Utility bill payment options.• Borrow or barter.• Plug small leaks.

SOLUTIONS – COMPARISON SHOP.• Brand name – store brand – generic.• Determine if quality justifies higher

cost.• Unit Price Calculation. (Use calculator)