BASIC FINANCE AND BUDGETING. Taking Control of Your Finances Monitoring your personal finances and...

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BASIC FINANCE AND BASIC FINANCE AND BUDGETING BUDGETING

Transcript of BASIC FINANCE AND BUDGETING. Taking Control of Your Finances Monitoring your personal finances and...

BASIC FINANCE AND BASIC FINANCE AND BUDGETINGBUDGETING

Taking Control of Your Finances Monitoring your personal finances and budgeting can help

you: Get organized Gain control of your money Save money Reduce or avoid debt

It is extremely important to be aware of your spending habits and fully understand the financial limits within which you must live.

A personal spending plan, or budget, is essential for you to monitor your cash flow each month and take control of your finances.

Getting Started – Identify Income In order to properly

manage your own finances and create a budget, you must first identify your sources of income.

Possible Income Sources: Wages and Salaries Bonuses and Commissions Government Benefits Veteran’s Benefits Worker’s Compensation Unemployment Compensation Social Security Alimony and Child Support Tax Refunds Scholarships Interest and Dividends Pensions

Getting Started – Identify Expenses After you have calculated your total income, you

need to determine how much you spend.

Keep everything!○ Bills, receipts, etc.

Create a spending log.○ Write down all of your expenditures in one place.

A simple notebook or spreadsheet both work well. Revisit your spending log.

○ Every time you spend money, update your spending log.

Getting Started – Identify Expenses Fixed Expenses, Variable Expenses,

and Future Expenses Determine how much you MUST spend.

Needs v. WantsBudgeting Tools

Common Expenses Food Clothing Shelter Child Care Contributions Transportation /

Parking Healthcare /

Prescriptions Personal Care

Educational Costs Entertainment /

Activities Gifts Installment

Payments Insurance Utilities Miscellaneous

Determining Your Fixed Expenses Fixed Expenses are those expenses that are paid

at regular intervals in a fixed amount. Common examples include:Rent/Mortgage PaymentsCar/Truck PaymentsInsurance

○ Auto Insurance○ Renter’s/Homeowner’s Insurance○ Health Insurance

Others?

Determining Your Fixed Expenses• Rent/Mortgage* Payments

– Sample Rental Rates– Brandywine Apartments: $685 - $885 per month– Woodfield Apartments: $605 - $1,005 per month– Residences at Rodney Square: $869 - $2,130 per

month– Pine Grove Apartments: $770 - $950 per month– Village of Westover Apartments: $839 - $1,099 per

month

*Additional information on buying a house and related financing tips are available by contacting the Delaware Bankruptcy Inn of Court.

Determining Your Fixed Expenses Car/Truck* Payments

Sample: $500 per month

*Additional information on buying a car/truck and related financing tips are available by contacting the Delaware Bankruptcy Inn of Court.

Determining Your Fixed Expenses Insurance Payments

Renter’s/Homeowner’s Insurance○ Sample Renter’s Insurance Payment: $40 per

month○ Sample Homeowner’s Insurance Payment:

[$XXX] per monthHealth Insurance*

○ Sample: [$XXX] per month

*Additional information on children’s health insurance and other healthcare resources are available by contacting the Delaware Bankruptcy Inn of Court.

Determining Your Fixed Expenses Insurance Payments

Auto Insurance○ Sample: $100 per month ○ It’s cheaper (and easier) to pay less often.

$250 per quarter v. $450 twice per year - $100 x 12 = $1,200- $250 x 4 = $1,000- $450 x 2 = $900

Determining Your Fixed Expenses Others

Ask yourself: Do I have any other expenses every month/quarter/year that do not change?○ Examples:

Cable/Satellite Television?Internet?Furnishings?Parking?

Make a List of Your Fixed ExpensesSample: Rent = $800.00 Car Payment = $500.00 Auto Insurance = $130.00 Renter’s Insurance = $40.00 Parking = $145.00 Other = ______________ Total Monthly

Fixed Expenses = $1,615.00

Determining Your Variable Expenses What bills do you get/expenses do you have that

are different amounts each month? Examples:

GroceriesElectricityGasolineTelephoneEntertainment

Tracking and looking back through records and receipts will be necessary to establish realistic figures for your variable expenses.

Determining Your Variable Expenses• Electricity

– Save your electricity bills.– How much is the bill each month?

• January = $137.45• February = $147.34• March = $183.20• April = $125.46• May = $155.67

– Average the monthly bills: – $149.82 is the average amount

Determining Your Variable Expenses Tips on Managing Electricity Charges

Get on a budget plan○ https://www.delmarva.com/home/billing/

payment/budget/default.aspxTurn lights off when you leave the room.Do not have the T.V. on when you are not

watching it.

Determining Variable Expenses• Groceries

– Save your grocery receipts.– How much is the grocery bill each month?

• January = $525.05• February = $430.24• March = $357.89• April = $421.34• May = $505.28

– Average the monthly grocery bills: $447.96 is the average amount of the grocery bill.

Determining Your Variable Expenses• Tips on Managing Your Grocery Bill

– Go to the grocery store on a weekly or bi-weekly basis.

– Buy only what is on sale (get a savers card)• Why pay full price if you don’t have to?• Make your meals around what you can buy

cheaply, not what you have a craving for. • If chicken is on sale instead of pork – buy chicken!

• Be proactive – if an item is on sale, you use it, and it will not expire – buy it, then you won’t have to get it next week when it is no longer on sale.

Make a List of Your Total Variable Expenses

Cell phone = $ 125.35

Electric = $ 149.82

Groceries = $ 447.96

Gasoline = $ 225.00

Entertainment = $ 197.00

Other = $

Other = $

Total of Variable Expenses = $1,145.15

Future Expenses

What other expenses do you have?Home repairs?Car repairs?Car tags and maintenance?Medical expenses?Dental expenses?School supplies?Others?

Plan for Future Expenses

On average, car repairs and maintenance cost $652.00 per year/ $54.33 per month.

How much did you spend last year on dentist bills?

How much did you spend last year on medical bills?

Factor these into your budget!

Plan for Future Expenses Develop a list of financial goals:

Short-term goals – things that you hope to accomplish over the next couple months

Mid-term goals – things that are attainable within the next couple years

Long-term goals – things that are likely to take longer to achieve (college tuition)

Emergency FundAn emergency fund is money that is set aside to

cover unexpected expenses. Every spending plan should have an emergency fund that is 2 to 3 times your monthly income.

Making a Budget• Once you have calculated your total monthly

income and total monthly expenses, you can prepare your budget.

• Total Monthly Fixed Expenses = $1,615.00• Total Monthly Variable Expenses = $1,145.15• Total Monthly Future Expenses = $150.00

• Total money coming IN (Income) = $3,200.00• Total money going OUT (Expenses) = $2,910.15

Savings Based on the budget above, a deposit into savings each

month should be $439.85

$3200.00 - $2910.15 = $289.85

Budgeted costs = $150.00

Total to Savings = $439.85

Sample Budget

Distribute a sample budget with numbers filled in.

Needs v. Wants

Identify what on the worksheet from the prior slide is a Need and what is a Want?

Evaluation

Take the sample worksheet and cross out the Wants.

Total Savings After Evaluation After you subtract your Wants, your new

monthly budget/finances look like this:

Increase in Savings of $___________

Maintaining Your Budget Once you have created your budget, it is

important to maintain a good record-keeping system. Also, remember to update your budget regularly to reflect any changes in income or expenses.

If necessary, refine your monthly expenses to live within your means. The key is identifying family and financial priorities, realizing the costs involved, and maintaining a budget that is based on accurate information and established priorities.

Other Ways to Cut Costs: There are many ways to reduce your monthly

expenses to help you live within your means and save money. Here are a few tips:Put aside every coin you touchEat more meals at home / pack lunchStick to your shopping listUse public transportationUse coupons for needed itemsBuy generic or store brandsCompare unit pricing for best valueConsider buying used furnishings

Other Ways to Cut Costs Handle more home maintenance yourself Change AC and furnace filters every month Use utilities and household supplies less Cut down on expensive hobbies or

activities Take advantage of free activities / library Compare insurance companies to find best

rates

Additional Resources Delaware Office of the State Bank

Commissioner – Consumer Educationhttp://banking.delaware.gov/services/conedu/

toc.shtml Federal Deposit Insurance Corporation:

Money Smarthttp://www.fdic.gov/consumers/consumer/

moneysmart/index.html Delaware Health and Social Services, Division

of Services for Aging Adults with Physical Disabilities: Money Managementhttp://dhss.delaware.gov/dhss/dsaapd/money.html

Additional Resources Delaware Financial Literacy Institute

http://www.dfli.org/index.cfm Delaware Money School

http://www.delawaremoneyschool.com/index.cfm

First State Saveshttp://www.firststatesaves.org/

Delaware Bank at Schoolhttp://www.bankatschool.com/history.html

From Purses to Portfolioshttp://www.pursestoportfolios.com/