Money Management Strategies CHAPTER 5. Organizing Financial Records CHAPTER 5 SECTION 1

Money Management

StrategiesCHAPTER 5

Organizing Financial Records

CHAPTER 5 SECTION 1

What financial documents should you keep and organize?

What are some ways to organize these

documents?

Money Management

• Day-to-day financial activities necessary to get the most from your money.

• Money trade-offs

Financial Documents• First step in effective money

management is to organize your financial documents.

• Benefits:o Financial statuso Pay your bills on timeo Tax reportso Future planningo Investing decisions

Storing Financial Documents

1. Locate your documents and sort them into categories such as payroll stubs, savings account, checking account, bills, etc.

2. Label and file each document

3. Maintain filing discipline

Safe-Deposit Box

• A small, secure storage compartment that you can rent at a bank.

#1 Personal Financial Statements

CHAPTER 5 SECTION 2

Personal Balance Sheet

• Allows you to have a complete look at your financial situation.

• Step 1: Determine Assets

• Step 2: Determine Liabilities

• Step 3: Calculate Net Worth

• Step 4: Evaluate Financial Situation

Pg. 127 in text

Determine Assets• Liquid Assets• Real Estate Assets• Personal Possessions• Investment Assets

Liquid Assets• Cash and items that can quickly

be converted to cash.

• $800 in a savings account and $72 in cashoYour liquid assets are worth $872

Determine Liabilities• Current (short term debt) - paid

within one year

• Long-term – Debts that require a longer term of repayment

• Insolvency – the inability to pay debt when it’s due

#2 Cash FlowCHAPTER 5 SECTION 2

Cash Flow Statement• Movement of cash in and out of your

wallet and/or bank account.

• Step 1: Record your income

• Step 2: Record your expenses

• Step 3: Calculate your net cash flow

• Pg. 131 - chart

The next slide lists several types of

accounts. Categorize each account as belonging to the

personal balance sheet or cash flow statement.

1. Take-home pay

2. Transportation

3. Checking Account Balance

4. Groceries

5. Credit Card Balance

6. Investment income

7. Student Loan Payment

8. Mortgage

#3 Your Financial Position

CHAPTER 5 SECTION 2

What is your net worth?

• Deficit – spend more than you earn• Loans make up for deficit – increases

liabilities

• Surplus – spend less than you earn• Increases net worth• Invest – pay off debts – etc.

#4 Preparing a BudgetCHAPTER 5 SECTION 3

Budget• A plan for spending and investing your

money to meet your wants and needs.

• Step 1: Set your financial goals• Step 2: Estimate your income• Step 3: Budget for unexpected expenses• Step 4: Budget for fixed expenses• Step 5: Budget for variable expenses• Step 6: Record spending

Budget Variance

• The difference between the budget and the actual amount spent.

Increasing Your SavingsCHAPTER 5 SECTION 3

Increasing Your Savings

• Essential component – open a savings account

• PAY YOURSELF FIRST!

• PAYROLL SAVINGS DEDUCTION

• SPENDING LESS TO SAVE