Budgeting and Cash Flow Management

Objectives

• Describe the relationship between financial planning and budgeting.

• Understand how to set and achieve long-and short-term financial goals.

• Establish the structural and mechanical aspects appropriate for your personal budget.

Objectives

• Resolve conflicting financial needs and wants.

• Describe the key aspects of the implementation phase of budgeting.

• Illustrate the methods and techniques to keep income and expenditures within planned budget totals.

Objectives

• Perform the tasks of the evaluation phase of budgeting.

• Explain the techniques of talking effectively about money.

Budgeting and Cash-Flow Management

IF YOU FAIL TO PLAN,

YOU PLAN TO FAIL!

To succeed in money matters requires implementation of financial plans.

Financial Planning and Budgeting

• Financial planning

• Budgeting

• Values

• Goals

Comparison of Statements

PAST

Income and Expense

Statement (Cash Flow Statement)

PRESENT

Balance Sheet

FUTURE

Budget

Six Phases of Budgeting

Set Goals

Organize

Decide

Implement

Control

Evaluate

Achieve success in financial goals

Monitor, review, revise

after each period.

• Setting long-term goals—anything more than 12 months away.

• Developing short-term goals from long-term goals

• Prioritizing goals

• Making goals time and dollar specific

Financial Goal-Setting Phase of Budgeting

• Select recordkeeping format

• Use cash or accrual basis

• Select budget classifications

• Select time periods

Organization Phase of Budgeting

• Inflation and other economic factors

• Realistic budget estimates

• Reconciling initial estimates

Decision-Making Phase of Budgeting

Implementation Phase of Budgeting

• Recording actual income/expenditures

• Managing with a cash-flow calendar

• Utilizing a revolving savings fund

• Calculating time-period totals

Control Phase of Budgeting

• Stay on target

• Check progress

• Be alert to problems or errors

REASONS FOR BUDGET CONTROLS:

Control Phase of Budgeting

• Use a checking account

• Employ a credit control sheet

• Check accuracy

• Monitor unexpended balances

BUDGET CONTROL MEASURES:

Control Phase of Budgeting

• Justify exceptions

• Use the envelope system

• Employ subordinate budget

BUDGET CONTROL MEASURES:

Evaluation Phase of Budgeting

• Compare estimated and actual amounts

• Decide how to handle balances

• Assess progress toward goals

Discussions About Money

• Unilateral

• Shared

• Divided

MONEY MANAGEMENT AND FINANCIAL DECISION MAKING FOR COUPLES:

Discussions About Money

• More income/more expenses

• Reliance on “second” income

• Discretionary account for each individual

COMPLICATIONS FOR DUAL-EARNER HOUSEHOLDS:

Discussions About Money

• Child support

• Alimony

• His/Her/Our children

• His/Her funds

COMPLICATIONS BROUGHT BY REMARRIAGE:

• Freedom

• Trust

• Self-esteem

• Guilt

• Indifference

• Envy

• Security/Comfort

• Power/Control

Discussions About Money

EMOTIONS AND MONEY:

• Get to know yourself and partner

• Learn to manage disagreements

• Use “I” not “you” statements

• Focus on commonalties

• Be honest

Talking About Financial Matters

Develop MoneySense in Children

• Give access to money

• Give freedom to save and spend

• Teach responsibility

• Allow freedom to fail

• Talk about family finances

Your PersonalSpending Style

• Givers

• Me-spenders

• Big-spenders

• Tightwads

• Normal People

Couples Should DiscussPersonal Finances

• Child bearing

• Employment

• Food and clothing

• Housing and transportation

• Recreation and vacations

• Future security and debt