WHY BUDGET?

Money In &Money out

Objectives

• Students will be able to estimate monthly income and expenses

• Students will be able to determine whether they expect a surplus or deficit in their budget.

• Students recognize the importance of saving money for an emergency fund

Do Now:

• What is a Budget and • Why do I need one?

Student Answers:1.2.3.4.

Why is a Budget Necessary

Identifies and defines your financial goals

Manages your money

Directs your money flow

Increases your savings

Avoids spending money unnecessarily

Achieves your personal goals

Why Budget?

• Because of Scarcity:

“ A budget identifies expected income and expenses including savings…… a guide to help people live within their income”

Steps to managing your money:Short-term & Long-term goals

Budgeting is Effective Money Management

Effective money management is planning how to get the most from your money.

Good money managers keep track of where their money goes so that they can make it go farther.

Effective money management includes: Developing personal financial goals Organizing personal financial records Creating a personal monthly budget Evaluating personal financial health

• Individuals, households, government, businesses, and organizations all budget in order to know the amount of income available to be spent, how it will be spent and what will be saved over a set period of time

Why We Budget?

INCOME

Simply any money earned or

contributed to your household

from either personal finances

or a business.

EXPENSES

Money that you spend, this includes

anything you purchase. This includes both planned and unexpected expenses.

By keeping a budget, you become aware of how you might cut an expense and save for something you really want.

Wants verse Needs

Vocabulary Words

• Budget: is a spending plan and a list of spendable funds

• Deficit: insufficiency of revenues relative to expenses

• Scarcity: The basic economic situation– limited resources and unlimited wants.

• Surplus: revenue exceeds expenditures

Creating a Personal Budget

Alex’s BudgetDescription: Income (+) Expenses (-)

Earnings- babysitting and running errands

$80

College Fund $15

Snack Money $20

Saving for a Computer $15

Entertainment/Clothes $20

Your turn to create a Budget!

Key Points • A good personal budget: • covers basic expenses that occur on a routine basis• has money available for unexpected expenses, and• includes regular savings for future expenses.

Tips for sticking to a personal budget• Keep your budget in mind when you shop!• Be prepared to make large purchases by saving money

over time. • Compare prices for similar items at different stores.