Money Management Strategy

Chapter 3 Business Finance - Mrs. Stice

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CHAPTER 3

Money Management Strategy


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Have you ever found yourself wondering what happened to a sum

of money you had? Explain the circumstances.


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Look at the picture on page 61

When might this be a wise money management strategy? When might it make more sense to go ahead and buy the item, even if it’s not on sale?


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

can help you keep track of where your money goes so that you can make it go farther


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Trade off examples

Water instead of *****Attending school instead of *****Paid attention in class instead of****Spend money on clothes instead of****Buy the newest technology now instead

of*****


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Every time you make a decision, you are choosing one thing and rejecting another. Trade-offs are very common in financial decision making.


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Think about your own financial decisions this past week/month. Think about the trade offs that

occurred. Discuss your decisions with a partner.


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How can you be sure of making the right decisions when you’re faced with tough opportunity costs?

You may never know for sure, you can become a judge.

Use your values, goals, an the state of your finances.


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SCHOOLWORKHOMEWORK,BEDROOM

CAR

ORGANIZED –what skills or what do you do to get organized for…..

Money Mangement


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These skills can transfer to your financial life.


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Organizing Financial Document

Organize your personal financial and non-financial documents

What are some financial and non-financial documents that are important?


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Organizing Financial Document

Organize your personal financial and non-financial documents Some are:

Bank statements, paycheck stubs, car titles, birth certificates, tax forms, passports etc.

Once your are organized, you will have better handle on your needs, wants, and financial position


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Where to Keep Your Documents

Home file Simple, doesn’t take much space

Safe-deposit box Small secure storage compartment that you rent at a

bank

Computer


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SECTION 3 .2

Personal Financial Statements


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Predict the math skills you think you would need to know in order to

prepare personal balance sheets and cash flow statements in additions to

calculating net worth.


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Personal Balance Sheet

Documents that provide information about your current financial position and present a summary of your income and spending

They can help you: _________________________ Measure progress toward your ________________ Track your financial activities Organize information that you can use when you file

your tax return or apply for credit


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Balance Sheet & Net Worth

______________called net worth statement is a financial statement that list the items of value

that you own, the debts that you owe, and your _____________

_____________________ difference between the amount that you own and the

debts that you owe a measure of your current financial position


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Steps to Net Worth

1. Determine Your ____________

2. Determine your _____________

3. Calculate your _____________

4. ______________your financial situation


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Lets look at your own!In class!

1. Assets – did anyone have favorite toy or other item from your childhood? Valuable or not? Collectibles? Could we ask an appraiser, dealer, books, internet

2. Liabilities

3. Calculate your net worth

4. Evaluate your financial situation


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1st Step to net worth

1. Determine your assets Assets – items of value that you own, including cash,

property, personal possessions, and investment 4 kinds of wealth

___________cash and items that can be quickly converted to cash.

_____________that is own and market value is listed

_______________-valuable items you own

_______________retirement accounts, securities like stocks and bonds


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2nd Step to net worth

2. Determine Your Liabilities Debts that you owe

_______________– short-term debts that have to be paid within a year or so Medical bills, cash loans, taxes, insurance payments

______________debts that don’t have to be fully repaid for at least a year Car loans, student loans, mortgage loans

______________as telephone expense doesn’t qualify as liability because it gets paid monthly


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3rd Step to net worth

3. Calculate your _______________ Use the formula

Assets – liabilities = net worth

You want more assets than liabilities

If you have more liabilities then you may experience insolvency because you can’t pay your debts.


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4th Step to net worth

4. Evaluate Your Financial Situation Look at your statements and use it as a guide Is your net worth increasing? If so, keep it up! Is your net worth decreasing? If so, then what

changes do I need to do. Reduce spending/debt Increase income Increase investments Increase savings


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Lets look at your net worth again!!

• What could you do different?


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Analyze someone’s else balance sheet! Analyze the assets, liabilities, and net worth. How is it similar and

different from their own personal balance sheet?

I will give you a balance sheet to look at!


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CASH FLOW STATEMENT STEPS

Record your ____________

Record your ____________

Net cash flow


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Analyzing Your Financial Position From our Financial Statements

Net cash flows so does your net worth

Deficit by spending more-net worth declines

Surplus by spending less-net worth increases


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Net worth will go up if you

Increase savings

Spend less

Pay off debt


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SECTION 3 .3

Budgeting to Achieve Your Financial Goals


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YOU CAN LEARN TO LIVE WITHIN YOUR INCOME.

YOU CAN LEARN TO SPEND WISELY.

___________- a plan for using your money in a way that best meets

your wants and needs.


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Write a short story about yourself predicting where you will live in ten years. The story should include your

job, lifestyle, and financial goals. Your story will be shared so please write neat, correct punctuation and

spelling.


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6 STEPS

Prepare a Financial Budget


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1st Step Your financial goals

They are the purposes you want to accomplish with your money

So you need to plan your ____________

____________

____________


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2nd Estimating Your Income

List all possible ___________you will receive

Sometimes you may have to estimate

Don’t include money you won’t be getting. Ex: If you get hourly wage and it stays consistent then

use it. But don’t guess you might get more hours.


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3rd-Budget for the unexpected Expenses/Savings

Put aside money for _______________ Six month’s of living expenses in case lose job,

sickness, death, divorce Emergencies for things go wrong such as

washer/dryer breaks etc.

Helping a family member

Savings for _________________________


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4th Budgeting for _____________

These are ones that don’t change each month Mortgage, car loan, student loan, insurance

• Those expenses that change from month to month–Medical, clothes, food, heating and

cooling etc.

5th Budgeting for _______________


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6th – Recording What You Spend

Keep track of your spending and income

Several items in your budget are guesses.

Your budget won’t work out sometimes as planned.

The difference between spending amount and the budget amount is called _________________

____________if you spend less __________________ if you spend more


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7th Reviewing Spending and Saving Patterns

_____________ is a continual process

Review each month

May need to curtail spending or increase income

Revise your goals or adjust your budget may be necessary.


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How to Budget Successfully

A budget is

1. ______________

2. ______________

3. ______________


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Why Increase Your Savings

It is the key to establishing a sound financial future.

The more you save, the better you will be able to handle unexpected emergencies and the sooner you will be able to meet your financial goals

Maybe retire early and be comfortable Send your children to college


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Ways to Increase Your Savings

1. Set aside a fixed amount as savings before you sit down to pay your bills ___________________

2. __________________ Some employers offer this option

3. ______________ Spend less

Go library –

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SAVE SAVE SAVE

The _____________is more important than the method.

The __________, the better. Small amounts can ____________than most

people realize.
