Budgeting & Saving hUxttPh7_XQ.
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Budgeting & Saving https:// www.youtube.com/watch?v=h UxttPh7_XQ
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Transcript of Budgeting & Saving hUxttPh7_XQ.
Budgeting & Saving
https://www.youtube.com/watch?v=hUxttPh7_XQ
Review Terms• Budget• Deficit• Expenditure• Fixed Expense• Flexible Expense• Income• Savings• Surplus• Take-Home Pay• Unexpected Expense
Managing Your Money
• How you direct, control, & handle your money
• Figure out:– How much you currently have– Where it comes from– Where it goes– How much more you expect to receive in future
• Can make decisions on how to spend it
Budget
• Tool to help plan where available money goes• Itemized summary of probable expenditures
and income for a given period (month, week, etc.)
Preparing a Budget
Step 1: Forecast Your Income
• Forecast all possible sources of income– Job– Allowance– Gift– Interest on savings– Tax refunds– Etc.
• Can look at old pay stubs, bank statements, etc.
How to Estimate Gross Pay & Net Pay (will do in Computer Exercise)
Step 1: Estimate Gross PayMultiply your hourly wage by the number of hours worked each week (40, etc.) & the number of weeks in a month (4)
Gross Pay = $7.25 x 40 hrs/wk x 4 wks/mo $1,160.00
Step 2: Estimate DeductionsMultiply your Gross Pay by the estimated percentage of your pay taken out in taxes (18%)
Deductions = $1,160.00 x .18 $208.80
Step 3: Calculate Net PaySubtract the Deductions from your Gross Pay
Net Pay = $1,160.00 - $208.80 $951.20
ExampleBudgeted Actual
Income
Job (Take-Home Pay) $900.00
Other $0.00
Total Income $900.00
Step 2: Forecast Expenses
• Forecast fixed expenses– Expenses you must pay & have little or no control
over• Housing (rent, mortgage)• Taxes• Insurance
• Plan for savings– How much you need to set aside to achieve
financial goals
ExampleBudgeted Actual
Income
Job (Take-Home Pay) $900.00
Other 0.00
Total Income $900.00
Fixed Expenses
Rent $360.00
Charitable Donations 15.00
Renter’s Insurance 50.00
Bus Fare 20.00
Telephone 30.00
Savings 100.00
Total Fixed Expenses $575.00
• Plan for living expenses– Expenses for your lifestyle– Variable• Can change month-to-month• You have some control over
– You can adjust any of these to help meet your goals
ExampleBudgeted Actual
Income
Job (Take-Home Pay) $900.00
Other 0.00
Total Income $900.00
Fixed Expenses
Rent $360.00
Charitable Donations 15.00
Renter’s Insurance 50.00
Bus Fare 20.00
Telephone 30.00
Savings 100.00
Total Fixed Expenses $575.00
Flexible Living Expenses
Household $30.00
Groceries 150.00
Clothing 35.00
Entertainment 75.00
Dining Out 25.00
Total Flexible Expenses $325.00
Step 3: Balance Income & Expenses
• Review expenses to ensure your income covers them– May need to revise expenses (primarily living
expenses) if you cannot adjust income– May need to try to adjust income to help cover
expenses
ExampleBudgeted Actual
Total Income $900.00
Total Expenses
Total Fixed Expenses $575.00
Total Flexible Living Expenses $325.00
Total Expenses $900.00
Income Less Expenses $0.00
Step 4: Spend According to your Plan
• Stick to your budget• Avoid “impulse spending”
Step 5: Compare Actual Earning & Expenses with Targets
• At end of time period, evaluate if you met your income and expense targets
• Analyze areas for shortfalls– Did you not budget enough?– Did you not stick to budget?– Did you stay focused on your goal?
ExampleBudgeted Actual
Income
Job (Take-Home Pay) $900.00 $900.00
Other 0.00 50.00
Total Income $900.00 $950.00
Fixed Expenses
Rent $360.00 $360.00
Charitable Donations 15.00 15.00
Renter’s Insurance 50.00 50.00
Bus Fare 20.00 20.00
Telephone 30.00 30.00
Savings 100.00 100.00
Total Fixed Expenses $575.00 $575.00
Flexible Living Expenses
Household $30.00 $25.00
Groceries 150.00 175.00
Clothing 35.00 25.00
Entertainment 75.00 50.00
Dining Out 25.00 25.00
Total Flexible Expenses $325.00 $300.00
ExampleBudgeted Actual
Total Income $900.00 $950.00
Total Expenses
Total Fixed Expenses $575.00 $575.00
Total Flexible Living Expenses 325.00 300.00
Total Expenses $900.00 $875.00
Income Less Expenses $0.00 $75.00
Step 6: Repeat the Process
• Using info from budget analysis, prepare new budget for new time period– Forecast income– Forecast expenses– Evaluate at end of next time period
Reaching Your Financial Goals
• Establish financial goal– Ensure it’s:– Realistic– Measurable (specific)– Time-limited (a “by” date)– Affordable (set $$ goal)– Ex: “Save $4,800 to buy a car within 24 months.”
• Break down goal into realistic steps to reach goal– Ex: “Save $200 per month from my paycheck.”
Saving for the Unexpected
• Unexpected expenses may arise– Car breaks down– Unexpected illness/injury with out-of-pocket
medical expenses• Recommend you save 10% of your income to
cover unexpected expenses– 3 – 6 months of expenses should be in savings in
case of an emergency
Saving for the Future
• Important to keep money in savings account– Can’t get stolen– Earns interest (money paid to you for depositing
the money there)• Bank account may have monthly fee if you
don’t have minimum balance– Find out if it does; you may want to find a different
type of account or different bank
