Personal Personal FinanceFinance

Assignment sheet 2 Assignment sheet 2 Budgeting and SavingBudgeting and Saving

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Defining Your GoalsKinds of Goals

• Distinguish between short-term,medium-term, and long-term goals.– Short-term (up to five years)

– Medium-term (five to ten years)

– Long-term (ten or more years)

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Defining Your GoalsAsking Questions• Identify your financial goals: – What kind of housing do I want?

– Where do I want to live?

– What job do I want?

– What about my family life?

– What will I do for recreation?

– How much money will I need?

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Defining Your GoalsAsking Questions• Start planning to achieve your financial

goals:– How do I get there from here?

– What sacrifice does it take to achieve my goals?

– Do my spending habits matchmy goals?

Defining Your GoalsShort-Term Goals• Where will I be in five years?

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Will WorkFor Food

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Defining Your GoalsMedium-Term Goals• Where will I be in ten years?

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Defining Your GoalsLong-Term Goals• Where will I be in twenty years?

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Defining Your GoalsGoal Chart

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Which kind of goal would your plans for retirement most likely fall under?

A. Short-term goal

B. Medium-term goal

C. Long-term goal

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Which kind of goal would your plans for retirement most likely fall under?

A. Short-term goal

B. Medium-term goal

C. Long-term goal

What do you think?Discussion

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• What are short-term goals?

• What are medium-term goals?

• What are long-term goals?

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Defining Your GoalsPlanning Sharing Goals• How much do I want to share?

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Defining Your GoalsPlanning Saving Goals• How much do I want to save?

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Defining Your GoalsPlanning Spending Goals• How much do I want to (or can I) spend?

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Creating a BudgetBalancing Goals• A budget helps you achieve your goals.

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Creating a BudgetCash Flow• Estimate your income.

• Estimate your expenses.

• Estimate your savings.

• Estimate your sharing.

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Creating a BudgetCreating a Cash Flow Statement• Record your income.– Fixed income • Regular wages / salary

– Variable income • Overtime

• Side jobs – Mowing lawns

– Babysitting

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Creating a BudgetCreating a Cash Flow Statement• Record your income.

• Record your expenses. – Fixed expenses• Rent / house payment

• Car payment

• Food

• Utilities (electric, gas, cable TV, etc.)

Fixed Expenses

Rent $450

Car Payment $250

Food $275

Utilities $125

Variable Expenses

Car repair $125

Dentist co-pay $15

Dancing $20

New Tire $75

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Creating a BudgetCreating a Cash Flow Statement• Record your income.

• Record your expenses. – Fixed expenses

– Variable expenses• Auto repairs• Medical expenses• Entertainment / dates• Unexpected emergencies

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Using Your BudgetCreating a Budget• Use cash flow

statements.

• Note surplusesand deficits.

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Using Your BudgetQualities of a Good Budget• Based on your values

• Geared toward your goals

• Practical

• Flexible

• Accessible and easy to use

Budget

Excellent

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Using Your BudgetAccounting• Records

• Income

• Expenditures

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Using Your BudgetAssessing• Constantly assess and reassess budget.

• Revise when necessary.Fixed Expenses

Rent $450

Car Payment $250

Food $275

Utilities $125

Fixed Expenses

Rent $475

Car Payment

Food

Utilities

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Which of the following is not one of the five qualities of a good budget? Add the quality that is missing.

A. It is based on your values.

B. It is rigid.

C. It is geared toward your goals.

D. It is practical.

E. It is accessible.

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Which of the following is not one of the five qualities of a good budget?

A. It is based on your values.

B. It is rigid.

C. It is geared toward your goals.

D. It is practical.

E. It is accessible.

What do you think?Discussion

• What are the four steps of setting up a budget?

• What is the difference between a fixed and variable expense and give an example of each.

• What are some examples of “budget busters”?

• What are some tips for staying within your budget?

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