Monday January 30th Personal Finance 1. Journal: 5 reasons you need to budget

Which reason is most important to you and why?

How can you start budgeting now? 2. Self Assessment 3. Net Cash Flow Activity 4. Budgeting PowerPoint Notes

BudgetingEssential Questions Why is it important to have a balanced

budget? How does evaluation play a role in the

budgeting process?

Budget A budget is a plan for managing your

money for a given period of time A successful budget is

Carefully plannedPracticalFlexible Written

Where is the money coming from? Income: money you receive as payment for

goods or services Hourly Salary Interest Capital gains Commission

Discretionary Income: money left after paying essentials

Gross Income vs. Net Income

• Total amount of money you earned during a pay period

Gross Income

• Taxes• Retirement• Health

benefits

Payroll Deductions • Take home

pay • The amount of

the pay check

Net Income

Gross Income – Payroll Deductions = Net Income

Where is your money going? Expenses: what you spend money on

(needs and wants) Fixed expenses: cost the same amount every

time Variable expenses: fluctuate in amount Periodic or occasional: don’t pay every month,

can be fixed or variable Cash Flow: movement of money in and

out Income – Expenses = Cash Flow

What type of expense is it? Groceries? Cable TV Bill? Car loan payment? Gifts? Auto repair bill?

The Most Important Expense PYF: Pay Yourself First!

Immediately setting aside money into savings whenever you receive money

Used to meet long-term finance goalsBuilt into your budget

Net Worth Assets – Liabilities = Net Worth Asset: item that has economic value Market Value: price at which an asset would sell Liquidity: Ability to convert an asset to cash and

maintain value Liability: Financial obligations (debts) that must

be paid Personal Balance Sheet: List of assets,

liabilities, and net worth

Analyze your budget 0 Balance: income is equal to expenses Variance: difference between estimated

and actual expenses Surplus: An amount left over when

requirements have been met (if you spend less than you had expected)

Deficit: the amount by which a sum of money is less than the required amount (spending more than expected)

Things to remember Set SMART goals Analyze information (expenses, income,

etc) Create a plan (realistic and flexible) Implement the plan (follow your budget!) Monitor and modify the plan (it is not set

in stone, if it is not working then change it!)