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Spending Plans
“Take Charge of Your Finances” TAKE CHARGE – Unit IV
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Goals•Financial goals – specific objectives to be attained
through financial planning▫Short-term goals – less than one year▫Long-term goals – more than one year
•SMART goals are used as a way to plan the attainment of your goals.
S M A R T
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Specific State exactly what is to be done with the money involved.
Measurable Write the exact dollar amount.
Attainable Determine how it can be reached.
Realistic Do not set the goal for something unattainable or unrealistic.
Time Bound
Specifically state when the goal needs to be reached.
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 4Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
What is a Budget?
Document used to record both planned and actual
income and expenses over a period of time
A budget
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 5Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Money Management Tools
Statement of Financial Position
Income & Expense Statement
Spending Plan
What is my financial position
today?
What is my future money
management plan?
How have I managed my
money in the past?
Make changes
Determine what changes to make
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 6Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
A forward-looking Income and Expense Statement
May use the same template for both the Income and
Expense Statement and the Spending Plan
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 7Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Why is a Budget an important part of financial planning?
Analyze the opportunity costs of your trade-offs
to maximize financial well-
being
Helps set and reach goals
Help manage your money in a positive manner
Increase net worth
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 8Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Spending Plan Development Process
Step 1 - Track Current Income and
Expense
Step 2 - Personalize Your Spending Plan
Step 3 - Allocate
Money to Each Category
Step 4 - Implement and
Control
Step 5 - Evaluate and Make
AdjustmentsDevelop the spending plan
Maintain the spending plan
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 9Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Track Current Income and Expenses
Completed by developing an
Income and Expense Statement
Step 1 - Track Current Income and
Expense
Step 2 - Personalize Your Spending Plan
Step 3 - Allocate
Money to Each Category
Step 4 - Implement and
Control
Step 5 - Evaluate and Make
Adjustments
Ensures spending plan is realistic
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 10Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Personalize Your Spending PlanStep 1 - Track
Current Income and Expense
Step 2 - Personalize Your
Spending Plan
Step 3 - Allocate
Money to Each Category
Step 4 - Implement and
Control
Step 5 - Evaluate and Make
Adjustments
How will you develop a
spending plan?
What is the intended time period for your
spending plan?
What categories will your spending
plan include?
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 11Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Allocate Money to Each Category
Reference tracking from Step One
Determine what changes to make
Step 1 - Track Current Income and
Expense
Step 2 - Personalize Your Spending Plan
Step 3 - Allocate
Money to Each Category
Step 4 - Implement and
Control
Step 5 - Evaluate and Make
Adjustments
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 12Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
When allocating money consider:
Contractual Non-contractual
Trade-offs and opportunity
costsGoals Contractual
expenses
Required to pay expense for a specific amount of time - not easy to reduce or eliminate
Easy to reduce or eliminate
Rent, Internet, Cell phone Food, entertainment
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Spending Plan Guide10%
7%
30%
20%
15%
18% Saving and Investing 10%
Insurance 7%
Housing 30%
Transportation 20%
Food 15%
Other 18%
What variables may cause these percentages to be different?
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Net Gain or Net Loss?
Income ExpensesNet Gain
or Net Loss
Net Gain? Net Loss?• Add more
money to savings or another expense
• Increase income
• Decrease expenses
• Both
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Implement and Control
Make your planned spending decisions
Step 1 - Track Current Income and
Expense
Step 2 - Personalize Your Spending Plan
Step 3 - Allocate
Money to Each Category
Step 4 - Implement and
Control
Step 5 - Evaluate and Make
Adjustments
Use a control system to stay on track
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Control Systems
Money management computer software
Which control system would
help you stick to your spending
plan?Internet-based spending plan program
Depository institution programs
Check register system
Envelope system
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Evaluate and Make Adjustments
How well did your spending plan
work?
Step 1 - Track Current Income and
Expense
Step 2 - Personalize Your Spending Plan
Step 3 - Allocate
Money to Each Category
Step 4 - Implement and
Control
Step 5 - Evaluate and Make
Adjustments
Is your spending plan helping you
reach goals?
Do you need to make any
adjustments?
1.15.2.G1
© Family Economics & Financial Education – Updated May 2012 – Spending Plans – Slide 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
Summary• A spending plan is an
important financial planning tool▫Helps achieve goals
•Make your spending plan work for you
•Make sure to control, evaluate, and adjust your spending plan
Step 1 - Track Current Income and
Expense
Step 2 - Personalize Your Spending Plan
Step 3 - Allocate
Money to Each Category
Step 4 - Implement and
Control
Step 5 - Evaluate and Make
Adjustments