MONEY MANAGEME

NT28.2

OBJECTIVES

Discuss the importance of budgeting.

List the steps for preparing a budget.

THE MAIN IDEA Meeting your financial goals requires

you to know your income and expenses. A budget can enable you to track your spending and make choices about your money.

THE IMPORTANCE OF BUDGETING Money management is necessary for

consumers, businesses, and governments. A budget helps people set financial

priorities. A budget is a recording of

Your expected income Your expected expenses Your planned savings

THE IMPORTANCE OF BUDGETING Consumers, businesses, and

governments must figure out how to utilize their income.

Most people want more goods and service than they can afford

Budgeting helps you set priorities

AVERAGE HOUSEHOLD EXPENSES

If a family earns $3,000 a month, how much money would they likely spend on housing?

PREPARING A BUDGET There are 7 steps in preparing a budget

1. Set Your Financial Goals2. Estimate Your Income3. Budget for Unexpected Expenses and

Savings4. Budget for Fixed Expenses5. Budget for Variable Expenses6. Record What You Spend7. Review Spending and Saving Patterns

STEP 1: SET YOUR FINANCIAL GOALS As you prepare to set your financial goals,

you should consider several questions.What do I want to accomplish in the next month,

year, five years?What is important to me?Are my goals practical?

You might find it helpful to separate your goals into short-term, intermediate, and long-term goals.

STEP 2: ESTIMATE YOUR INCOME Start your budget by recording your

estimated income for the next month. Include all sources of income that you know

you will receive Your gross pay is reduced by various

deductions. Deductions include:

Taxes InsuranceRetirement contributions

Your take-home pay (after deductions) is called your net pay

STEP 3: BUDGET FOR UNEXPECTED EXPENSES AND SAVINGS

You have to plan for expenses such as food, rent, and clothing to satisfy your basic needs

Unexpected expenses include medical visits or accidents

Savings make it possible for you to meet future wants and needs

STEP 3: BUDGET FOR UNEXPECTED EXPENSES AND SAVINGS In your budget, make sure that the

total income figure is the same as the total for planned expenses and savings.

If your planned expenses and savings are more than your income, you will have to cut expenses or find additional income

I WISH!!!

STEP 4: BUDGET FOR FIXED EXPENSES Expenses that occur regularly Fixed Expenses include:

Rent InsuranceCar loan

STEP 5: BUDGET FOR VARIABLE EXPENSES Expenses that change and can be

controlled more easily that fixed expenses

Variable expenses include:FoodPhone chargesEntertainmentGifts

STEP 6: RECORD WHAT YOU SPEND

Keeping track of your expenses will help you revise your budget if necessary.

The budget variance is the difference between your budgeted amount and the actual amount you spend

It can be a surplus (extra money) or a deficit (not enough money)

STEP 7: REVIEW SPENDING AND SAVING PATTERNS

You need to review your budget each month and consider making changes.

ASSIGNMENT

Think about what your financial goals are.

Do you want to go to college, buy a car

or go on a school trip? Write a 300 word

essay that explains how making a

budget can help you reach you goals.

How do you plan to save up enough

money to reach your goals?

ASSIGNMENT

Complete Worksheet Packet for 28.2

Complete questions 2-14 on page

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