Budgeting: Making the Most of Your Money

?

What is a Budget?

• A plan that matches your estimated

income with your estimated

expenditures

– Many major decision in your life will be

driven based on a budget

– Based on budget goals

Budget Goals

• Short-Term Goals

– Involve immediate needs or desires such as ability

to pay for food, car repairs, medical emergencies,

and apartment rent

• Medium-Term Goals

– These are goals you hope to achieve in the next

few years, such as a college education, a big

vacation, a new home, home improvements, a

new car. You will need to save now to pay for

future expenses.

Budget Goals

• Long-Term Goals

– These are goals you hope to achieve in

five, ten, or more years from now. These

goals, mean building substantial savings

for a change in career, a change in

lifestyle, and a comfortable retirement.

Budgeting: Making the Most of Your Money

FIXED, VARIABLE, OR PERIODIC?

Expense Fixed Variable Periodic

Loan Payment X

Electric Bill X

Twice-yearly Insurance

Payment X

???

???

Budgeting: Making the Most of Your Money

Personal

Plan for

One Week

$20.00Balance

$120.00Savings and Spending

$140.00Income

$120.00Total Savings & Spending

15.00Miscellaneous

33.00Transportation

16.50Gifts and Contributions

10.00Entertainment

14.50Clothing

11.00Food

$20.00Savings (PYF)

Savings and Spending

$140.00Total Income

15.00Allowance

$125.00Part-Time Job

Income (after taxes)

One Week

Personal Spending/Savings Plan

$20.00Balance

$120.00Savings and Spending

$140.00Income

$120.00Total Savings & Spending

15.00Miscellaneous

33.00Transportation

16.50Gifts and Contributions

10.00Entertainment

14.50Clothing

11.00Food

$20.00Savings (PYF)

Savings and Spending

$140.00Total Income

15.00Allowance

$125.00Part-Time Job

Income (after taxes)

One Week

Personal Spending/Savings Plan

How to determine Net Worth

• To determine Net Worth, you have to

know how much you own (assets) and

how much you owe (liabilities).

• Subtract your liabilities from your assets

to get your Net Worth.

Net Worth = Assets - Liabilities

How to Build a Budget

1. Decide on a time frame for tracking expenses (week, two weeks, month).

2. List all money you have coming in (income).

3. Make categories for all expenses.

4. Subtract total expenses from income.

5. Study your budget and your financial plan to make sure it fits with your plans and goals.

Income

• Gross Pay

– The salary or wages earned before taxes

and deductions

• Net Pay

– The amount of money you take home after

taxes and other deductions have been

subtracted from your gross pay.

• The amount you actually have to spend

Payroll Deductions

• Federal Income Tax – A withholding pulled out of each paycheck and

sent to the federal government

• FICA Taxes – If you're a wage or salaried employee, you pay

only half the FICA bill (6.2% for Social Security plus 1.45% for Medicare), and the tax is automatically withheld. Your employer contributes the other half.

– If you're self-employed, however, you're expected to cough up both the employee and the employer share of FICA. You are, however, permitted to deduct half of this self-employment tax as a business expense.

Payroll Deductions

• NYS Income Tax deduction

– Another withholding going to New York

State

• Other deductions

– Health insurance (if cost shared or burden

on employee)

– Life or dental insurance

– Optional Savings plans

Pay Statement

Taxes

• W-4 Forms

– You complete Form W-4 so that your employer can withhold the correct federal income tax from your pay. Consider completing a new Form W-4 each year and when your personal or financial situation changes.

• W-2 Forms

– You will need to report all wages you earned from your job or jobs during the year. Your employers are required to provide you with Form W-2, Wage and Tax Statement. Form W-2 must be mailed out or hand-delivered to you no later than January 31st.