Money Management - Money Management - 101101

Practical Practical MoneyMoney Skills for Life Skills for Life

What a Spending Plan will What a Spending Plan will do for Youdo for You

$ Allow you to learn how finances work in your Allow you to learn how finances work in your lifelife

$ Enable you to make good decisions about Enable you to make good decisions about how you use moneyhow you use money

$ Make you aware of where your money is Make you aware of where your money is goinggoing

$ Give you a way to save for specific itemsGive you a way to save for specific items$ Help you to live within your income- or decide Help you to live within your income- or decide

if you need to increase it if you need to increase it

A Spending Plan willA Spending Plan will

Show you where to cut spendingShow you where to cut spendingProvide methods for keeping good records Provide methods for keeping good records

of spendingof spendingAllow you to spend money without feeling Allow you to spend money without feeling

guiltyguiltyCreate a way to measure your progressCreate a way to measure your progressImprove communication with other peopleImprove communication with other people

Step 1: Assess NeedsStep 1: Assess Needs

Make a realistic list of needs and wantsMake a realistic list of needs and wantsNeedsNeeds WantsWantsFoodFood Lots of MoneyLots of MoneyClothingClothing Cell PhoneCell PhoneHousingHousing VCR or Big TVVCR or Big TVTransportationTransportation New CarNew CarChild CareChild Care Designer JeansDesigner JeansInsuranceInsurance VacationsVacationsMedicinesMedicines BoatBoat

Titan TicketsTitan Tickets

Step 2: Set GoalsStep 2: Set Goals

Make sure your goals are Make sure your goals are SMARTSMART……

SSpecific- Clearly state what you want to dopecific- Clearly state what you want to do

MMeasurable- Measure by time and/or money easurable- Measure by time and/or money neededneeded

AAttainable- Make sure your goal is realistic and ttainable- Make sure your goal is realistic and possiblepossible

RRelevant- Make sure goals fit your needselevant- Make sure goals fit your needsTTime related- Set a definite target day ime related- Set a definite target day

(day/month/ year) (day/month/ year)

Step 3: Make a PlanStep 3: Make a Plan

Put things in Priority Order- Imagine the Put things in Priority Order- Imagine the actions you need to take to get from actions you need to take to get from where you are now to where you want to where you are now to where you want to be. be.

Goals are dreams with deadlines! Post Goals are dreams with deadlines! Post your goals where you will see them your goals where you will see them frequently. Find a picture to represent frequently. Find a picture to represent your goals. Make them happen.your goals. Make them happen.

SMART GOALSMART GOAL

GOAL: Use cash to purchase a refrigerator in 6 months. New refrigerator will cost $600.00.

MUST SAVE FROM EACH PAYCHECK:

$100/Paycheck - if paid monthly

$50/Paycheck - if paid bi-weekly or semi-monthly

$25/Paycheck - if paid weekly

I will save $25.00 from each weekly paycheck for refrigerator.

Steps to Get There:

•Pack lunches.

•Borrow movies and CD’s from the library.

•Shop with a list for everything.

•Stay out of Walmart!

Your Plan with Actions

TARGET DATE: 6 MONTHS

PRIORITIZINGPRIORITIZING GOALSGOALS

1. Build an emergency savings of $_____________.

A. Put $50.00 from each paycheck for 5 months.

B. Use OVERTIME or BONUS $$ to build more quickly.

2. Build a retirement account.

Put $50.00 (automatic deduction)

401(k)

Roth IRA

Two Parts of Money Two Parts of Money ManagementManagement

The money that The money that comes in - INCOMEcomes in - INCOME

Regular take home Regular take home incomeincome

The money that goes The money that goes out – SPENDINGout – SPENDING

Must know what you Must know what you are spending to are spending to develop a plan for develop a plan for managing your managing your money. money.

Three type of Three type of expensesexpenses

Making your MoneyMaking your Money

How much money comes in each month?How much money comes in each month?

Income has two parts:Income has two parts:

1)1) Gross income- total you actually earnGross income- total you actually earn

2)2) Net income (take home pay) - what is Net income (take home pay) - what is left over after your employer takes out left over after your employer takes out deductions for taxes, Social Security, deductions for taxes, Social Security, Medicare, and other needs.Medicare, and other needs.

ThreeThree Types of Expenses Types of Expenses

Fixed expensesFixed expenses

Flexible (variable or controllable) Flexible (variable or controllable) expensesexpenses

Periodic or occasional expensesPeriodic or occasional expenses

FIXED / MONTHLY EXPENSESFIXED / MONTHLY EXPENSES

•Car Payments

•Rent or Mortgage

•Child Care

•Cable TV

•Car Insurance

FLEXIBLE / VARIABLE EXPENSESFLEXIBLE / VARIABLE EXPENSES

•Clothing

•Food

at home

away from home

•Telephone

•Utilities

•Gasoline

•Clothing

•Food

at home

away from home

•Telephone

•Utilities

•Gasoline

FLEXIBLE / VARIABLE EXPENSES (cont)..FLEXIBLE / VARIABLE EXPENSES (cont)..

•Public Transportation

•Medical / Dental

•Recreation

•Supplies

household

personal

•Public Transportation

•Medical / Dental

•Recreation

•Supplies

household

personal

OCCASIONAL / SEASONAL EXPENSESOCCASIONAL / SEASONAL EXPENSES

Car Maintenance / Repairs

License Tags

Insurance Payments

Gifts / Holidays

School

Taxes

Magazine Subscriptions

Vacations

$500

$100

$600

$800

$0

$200

$0

$200

$2400 / 12 = $200/month

Tracking your moneyTracking your money

Keep and organize the following items to help Keep and organize the following items to help you keep up with expensesyou keep up with expenses

$ Check registersCheck registers$ Check stubs and canceled checksCheck stubs and canceled checks$ ReceiptsReceipts$ Bills and invoices Bills and invoices $ Credit card statementsCredit card statements$ Calendars, diaries, pocket notebooksCalendars, diaries, pocket notebooks

Trimming ExpensesTrimming Expenses$ Pack lunch for work or schoolPack lunch for work or school$ Shop for store or generic brandsShop for store or generic brands$ Use the public libraryUse the public library$ Choose free recreational activitiesChoose free recreational activities$ Check resale shops or garage sales for Check resale shops or garage sales for

bargainsbargains$ Eat out less oftenEat out less often$ Handle home maintenance and repairs Handle home maintenance and repairs

yourselfyourself$ Use public transportation when possibleUse public transportation when possible$ Take advantage of free activitiesTake advantage of free activities

SAVINGSSAVINGSIt’s never impossible to It’s never impossible to save money, no matter save money, no matter how small the amounthow small the amount. .

Saving Your MoneySaving Your Money

Two types of savings accounts…Two types of savings accounts…

1)Emergency fund – provides means for 1)Emergency fund – provides means for paying for emergencies instead of paying for emergencies instead of using creditusing credit

2) Nest egg account- helps you reach 2) Nest egg account- helps you reach specific goals such as buying a house specific goals such as buying a house or taking a vacationor taking a vacation

Start the Savings Habit Start the Savings Habit Now!Now!

$ If you save $20 per week, every week for If you save $20 per week, every week for a year, after one year you will have a year, after one year you will have saved $1,040!saved $1,040!

$ Keep this up and after five years you will Keep this up and after five years you will save $5,200, not to mention the interest save $5,200, not to mention the interest you will earn!you will earn!

WAYS TO SAVEWAYS TO SAVE

Work average 22 days/monthWork average 22 days/month

Lunch $8.00/day $176/month

Coffee $1.00/day $22/month

Soft Drinks $1.00/day $22/month

Child’s Lunch $2.00/day $44/month

Total $264/month

Remember these tips…Remember these tips…

$ Don’t shop on paydayDon’t shop on payday$ Don’t shop when you’re tiredDon’t shop when you’re tired$ Don’t shop for food when you’re hungryDon’t shop for food when you’re hungry$ Take your time. Try not to shop when you have Take your time. Try not to shop when you have

to hurryto hurry$ You don’t have to buy it todayYou don’t have to buy it today$ Remember, nothing is a bargain unless you Remember, nothing is a bargain unless you

need itneed it$ Have a spending plan and stick to itHave a spending plan and stick to it$ No one can make you buy anythingNo one can make you buy anything

How much debt is too How much debt is too much?much?

Rule of thumb for consumer debtRule of thumb for consumer debtUnder 15%=comfortableUnder 15%=comfortable 15-20%=Caution15-20%=Caution

Over 20%=Danger!!!Over 20%=Danger!!!

To figure your debt-to-income ratio:To figure your debt-to-income ratio:

Total average monthly debt paymentsTotal average monthly debt payments(excluding mortgage/rent and utilities) $400(excluding mortgage/rent and utilities) $400

Monthly take-home payMonthly take-home pay $2,000$2,000

$400 $400 ÷ $2,000 = .20 = 20%÷ $2,000 = .20 = 20%

Managing your MoneyManaging your Money

Developing a Personal Spending Plan will Developing a Personal Spending Plan will show you…show you…

$ What money is coming in What money is coming in $ How much you spend on the basic needs, How much you spend on the basic needs,

fixed and variablefixed and variable$ How much you need to set aside for periodic How much you need to set aside for periodic

or unexpected expensesor unexpected expenses$ How to plan for savings and investingHow to plan for savings and investing$ What is left over for your wantsWhat is left over for your wants

Money Management - Money Management - 101101

Get the most from your Get the most from your MoneyMoney

Set GoalsSet GoalsDevelop a PlanDevelop a PlanBalance Spending and SavingBalance Spending and Saving