Objective: Students will learn how to prepare a budget and identify the difference between financial...
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Transcript of Objective: Students will learn how to prepare a budget and identify the difference between financial...
Objective: Students will learn how to Objective: Students will learn how to prepare a budget and identify the prepare a budget and identify the
difference between financial planning difference between financial planning and personal budget. and personal budget.
We’ve discussed financial
planning, who can tell me what is financial planning?
Financial Planning
While both financial planning and budgeting
are important tools in creating a stable financial situation each function provides specific benefits.
Budgeting makes it possible to handle day-to-day costs and expenses in a manner that keeps you moving forward.
Financial planning makes it possible to have a destination or goal for that movement, which in turn enhances the work of the budget.
Financial Planning & Budgeting
The financial plan is the identification of the
goal, while budgeting is the tool to make the realization of that goal possible.
Financial Planning versus Budgeting
If the goal is to set aside funds for a child’s
college education: Financial planning will go through the process of
determining how much money must be set aside in order to fund four years at the institution of choice.
Once the goal is clear, it is possible to look at the available revenue stream and determine how much money must be set aside each pay period in order to save the desired amount of money. That amount is then included in the budget and set aside each pay period so the funds will be available for the child’s college career.
For Example
1. Gather every financial statement you can.2. Record all of your sources of income.3. Create a list of monthly expenses.4. Break expenses into two categories: fixed and
variable.5. Total your monthly income and monthly
expenses.6. Make adjustments to expenses.7. Review you budget monthly.
How to Create a Budget
When creating a budget it’s best to
K.I.S.S. What you should remember:
Expenses > Income = Bad Expenses < Income = Good
Formula
Income: Net Pay $3,000 a mo.
Expenses:
Home $1,500 a mo.
Car $350 a mo.
Food $400 a mo.
Savings $750 a mo.
Total Expenses $3,000 a mo.
Sample Budget
What was our objective for today? Tomorrow you will have an in class
packet to complete about personal budgeting.
Conclusion