Budgeting:Making the Mostof Your Money

Only 40 percent of Americans use a budget to plan their spending…

The rest routinely spend more than they can afford.

In this Unit We Will…

• Examine reasons to keep track of your spending• Summarize the advantages of having a spending plan• Identify various sources of income• Identify various types of expenses• Explain the purpose of paying yourself first (P.Y.F.)• Explain how to build a budget• Examine forms of record keeping involved with budget and

cash management• Summarize how a budget will change throughout your life

cycle

How Do You Manage Your

Time?

A spending plan or budget is

A plan for managing your money during a given period of time

Why have a budget?

• Helps determine where you are spending your money currently• Helps decide where to spend your

money in the future• You have an organized way to save for

things that cost more• Puts you in control of your financial

future, beginning NOW.

People without a budget…

• Are less likely to know what they have• Have no plan, often coming up short

before their next paycheck or allowance• Are almost certain to have no plan to

save for more expensive spending goals

• Does it makes sense to create and live within a budget when you don’t have a lot of money?• What if you find that you are

consistently spending more in one area than you had planned to?• What if you find that you can’t live

within your budget?

Questions?

A budget is made up of…1. Income– Wages from jobs– Allowances– Gifts– Interests from savings or investments

2. Spending– Expenses for our needs and wants

Payroll Deductions• Taxes – government fees on business

and individual income, activities, products or property.• Medical Insurance• Savings in Retirement accounts

4 Common Tax Deductions1. Federal Income Tax – tax on the amount

of income people earn2. State Income Tax - TN does not have

3. Social Security Tax – Provides a small income and other services to the elderly, disabled Americans, and orphaned minors.

4. Medicare Tax – provides medical insurance to the elderly and some disabled Americans

1. Fixed: cost the same amt every time

Home loan, car loan, rent

3 Main Areas of Expenses

2. Variable: fluctuate in amt, you have some control on how much they’ll be

Groceries, gas, power and water

3 Main Areas of Expenses

3. Periodic or Occasional: ones you don’t pay every month

be fixed or variable also Car insurance (every six months) Car repairs, doctor visits

3 Main Areas of Expenses

Description Fixed? Variable? Periodic?GroceriesPiano LessonsCable TV BillMagazine Subscription RenewalCar Loan PaymentCell Phone Bill

What type of Expense is it?

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√√

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Most Important Expense!!!

PYF

AY

OURSELF

IRST

Putting away money for

savings should be included with all your

other expenses

Building a Budget Jackson’s Monthly BudgetEstimated Income:

Paycheck (after taxes) $2,100.00

Interest Earned 50.00

Total Estimated Income $2,150.00

Fixed Expenses:

Savings (P.Y.F.) $500.00

Car Payment 325.00

Rent 750.00

Cable TV/Internet 75.00

Estimated Variable Expenses:

Utilities 150.00

Food 200.00

Gas 100.00

Periodic Expenses:

Car Insurance ($300/6 months) 50.00

Total Expenses $2,150.00

Total Income $2,150.00

- Total Expenses 2,150.00

$ 0

1. Decide the time frame for tracking your income and expenses.

2. List all the money you have coming in and total all your income.

3. Categorize your expenses into fixed, variable and periodic.

4. Subtract your total expenses from your total income. It should equal zero.

5. Step back and look at your budget and your financial plan. Do you need to adjust it to bring your spending plan more in line with your financial goals?

Documents You Should Keep Track of…

1. Checking account statements2. Savings and investments statements3. Pay stubs4. Tax documents5. Insurance statements6. Loan and credit card statements7. Receipts & warranties for big-ticket items