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© Take Charge Today – August 2013 – Spending Plans – Slide 1Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Money Management Tools

Statement of Financial Position

Income & Expense Statement

Spending Plan

What is my financial position

today?

What is my futuremoney

management plan?

How have I managed my

money in the past?

Make changes

Determine what changes to make

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© Take Charge Today – August 2013 – Spending Plans – Slide 2Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Budget Bean Game

• Round 1: Check to make sure you have 20 beans.

• You must select one item in each of the categories with the gold stars (food, housing, furnishings, transportation, insurance and clothing & laundry)

• Then, continue selecting items until you have used up your 20 bean income.

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© Take Charge Today – August 2013 – Spending Plans – Slide 3Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• In what ways were you influenced by your values?

• Your goals?

• Your previous experiences?

• Compare what you spent your beans on with another person.

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© Take Charge Today – August 2013 – Spending Plans – Slide 4Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• Round 2—Your income has just been cut to 13 beans.

• What will you give up?

• What changes will you make?

• Make changes until you only have 13 beans on your spending card.

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© Take Charge Today – August 2013 – Spending Plans – Slide 5Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

• What kinds of items did you choose to give up and why?

• What did you learn about yourself and money in this process?

• Compare your budget-cutting choices with another student.

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© Take Charge Today – August 2013 – Spending Plans – Slide 6Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

What is a Spending Plan?

An income and expense statement sometimes referred to as a budget which records both planned and actual income and expenses over a period of time

A budget

Cosby Video

http://vimeo.com/4653537

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© Take Charge Today – August 2013 – Spending Plans – Slide 7Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Why is a Spending Plan an important part of financial planning?

Analyze the opportunity costs of your trade-offs

to maximize financial well-

being

Helps set and reach goals

Help manage your money in a positive manner

Increase net worth

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© Take Charge Today – August 2013 – Spending Plans – Slide 8Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

A forward-looking Income and Expense Statement

May use the same template for both the Income and

Expense Statement and the Spending Plan

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© Take Charge Today – August 2013 – Spending Plans – Slide 9Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Spending Plan Development Process

Step 1 - Track Current Income and

Expense

Step 2 -Personalize Your Spending Plan

Step 3 -Allocate

Money to Each Category

Step 4 -Implement and

Control

Step 5 - Evaluate and Make

AdjustmentsDevelop the spending plan

Maintain the spending plan

http://handsonbanking.org/htdocs/en/t/#/en/t/bu/index.html

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© Take Charge Today – August 2013 – Spending Plans – Slide 10Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Envelope System

• https://www.youtube.com/watch?v=hLXk0Y7Y6UI&feature=related

• Each envelope is labeled for the category of spending.• Each pay period, a pre-determined amount is placed in

each envelope.• Each time money is spent from an envelope, the

transaction details (date, vendor, amount, etc.) is recorded on the outside of the envelope.

• When the envelope is empty, spending stops!

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© Take Charge Today – August 2013 – Spending Plans – Slide 11Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Paper Tracking

• Record transactions in a check register format for each category.

• https://www.youtube.com/watch?v=oHIs9gU_QHo

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© Take Charge Today – August 2013 – Spending Plans – Slide 12Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Online or Software Optionshttps://www.youtube.com/watch?v=DlwlFGTvJRwhttps://www.youtube.com/watch?v=Pt3SJVfhmRo

http://www.quicken.com/personal-finance/starter-edition-2015

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© Take Charge Today – August 2013 – Spending Plans – Slide 13Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Congratulations! You have been hired as a financial

advisor for John and Tia Brown

Financial Advisor Information Your Job

• Developed a Statement of Financial Position and Income and Expense Statement

• Identified the following goals:

• Develop a spending plan for the Brown family

Increase the amount of their

emergency savings fund

Spend less money on

clothing every month

Pay more on their monthly car loan payment to pay

the loan off faster

Spend less money dining out at restaurants

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© Take Charge Today – August 2013 – Spending Plans – Slide 14Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

The Brown FamilyStep One: Track Current Income and Expenses

Financial Advisor Information

Your Job

Kept all receipts for the month of January to create an Income and Expense Statement

Review John and Tia’s January Income and Expense Statement for a realistic view of their income and expenses

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© Take Charge Today – August 2013 – Spending Plans – Slide 15Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

The Brown FamilyStep Two: Personalize Your Spending Plan

Financial Advisor Information

Your Job

• Requested a spending plan for the month of February

• Requested the same document and categories as the Income and Expense Statement

• Find the column on the Income and Expense Statement where the Spending plan will be created

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© Take Charge Today – August 2013 – Spending Plans – Slide 16Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Personalize Your Spending Plan

Step 1 - Track Current Income and

Expense

Step 2 -Personalize Your

Spending Plan

Step 3 -Allocate

Money to Each Category

Step 4 -Implement and

Control

Step 5 - Evaluate and Make

Adjustments

How will you develop a

spending plan?

What is the intended time period for your

spending plan?

What categories will your spending

plan include?

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© Take Charge Today – August 2013 – Spending Plans – Slide 17Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Allocate Money to Each Category

Reference tracking from Step One

Determine what changes to make

Step 1 - Track Current Income and

Expense

Step 2 -Personalize Your Spending Plan

Step 3 -Allocate

Money to Each Category

Step 4 -Implement and

Control

Step 5 - Evaluate and Make

Adjustments

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© Take Charge Today – August 2013 – Spending Plans – Slide 18Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

The Brown FamilyStep Three: Allocate Money to Each Category

Financial Advisor Information

• Indicated a * next to expenses that are either contractual or they are unwilling to decrease

• Remember goals• Consider trade-offs• Must have a net gain or a zero

balance

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© Take Charge Today – August 2013 – Spending Plans – Slide 19Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

The Brown FamilyStep Three: Allocate Money to Each Category

Your Job

• Develop a spending plan for the family

• Explain each change made• Re-write goals into SMART

goals using their new spending plan

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© Take Charge Today – August 2013 – Spending Plans – Slide 20Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

SMART GOALS

S

M

A

R

T

SPECIFIC: State exactly what is to be done with the money.

MEASURABLE: Write the exact dollar amount.

ATTAINABLE: Create a step-by-step plan outlining exactly

how the goal can be reached.

REALISTIC: List the next best thing you will NOT be able to

do/buy instead (opportunity cost).

TIME-BOUND: Specifically state the date the goal will be

reached.

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© Take Charge Today – August 2013 – Spending Plans – Slide 21Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

The Brown FamilyStep Four: Implement and Control

Your Job

•Recommend a control system for John and Tia

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© Take Charge Today – August 2013– Spending Plans – Slide 22Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

What is the intended time period for your spending plan?

What categories will your spending plan include?

• Usually concurrent with pay period

• Reference tracking from the Income and Expense Statement

• Do any categories need added, changed, or removed?

What time period would you choose for your spending

plan?

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© Take Charge Today – August 2013 – Spending Plans – Slide 23Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

When allocating money consider:

Contractual Non-contractual

Trade-offs and opportunity

costsGoals

Contractual expenses

Required to pay expense for a specific amount of time - not easy to reduce or eliminate

Easy to reduce or eliminate

Rent, Internet, Cell phone Food, entertainment

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© Take Charge Today – August 2013 – Spending Plans – Slide 24Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Net Gain or Net Loss?

Income ExpensesNet Gain

or Net Loss

Net Gain? Net Loss?

• Add more money to savings or another expense

• Increase income

• Decrease expenses

• Both

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© Take Charge Today – August 2013 – Spending Plans – Slide 25Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Implement and Control

Make your planned spending decisions

Step 1 - Track Current Income and

Expense

Step 2 -Personalize Your Spending Plan

Step 3 -Allocate

Money to Each Category

Step 4 -Implement and

Control

Step 5 - Evaluate and Make

Adjustments

Use a control system to stay on track

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© Take Charge Today – August 2013 – Spending Plans – Slide 26Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

How will you implement your spending plan?

Any writtenmethod

that works for you

Paper and pencil

Spreadsheet

Money management computer software

Applications

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© Take Charge Today – August 2013 – Spending Plans – Slide 27Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Control Systems

Money management computer software

Which control system would

help you stick to your spending

plan?Internet-based spending plan program

Depository institution programs

Check register system

Envelope system

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© Take Charge Today – August 2013 – Spending Plans – Slide 28Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

SMART GOALS

S

M

A

R

T

SPECIFIC: State exactly what is to be done with the money.

MEASURABLE: Write the exact dollar amount.

ATTAINABLE: Create a step-by-step plan outlining exactly

how the goal can be reached.

REALISTIC: List the next best thing you will NOT be able to

do/buy instead (opportunity cost).

TIME-BOUND: Specifically state the date the goal will be

reached.

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© Take Charge Today – August 2013 – Spending Plans – Slide 29Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

The Brown FamilyStep Five: Evaluate and Make Adjustments

How could creating a

spending plan help you now

and in the future?

Financial Advisor Information

Your Job

• John and Tia realized that if they dine out at restaurants less often they will need to increase their monthly grocery expense

• Increase their grocery budget by $20.00

• How has developing a spending plan helped the Brown family?

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© Take Charge Today – August 2013 – Spending Plans – Slide 30Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Evaluate and Make Adjustments

How well did your spending plan

work?

Step 1 - Track Current Income and

Expense

Step 2 -Personalize Your Spending Plan

Step 3 -Allocate

Money to Each Category

Step 4 -Implement and

Control

Step 5 - Evaluate and Make

Adjustments

Is your spending plan helping you

reach goals?

Do you need to make any

adjustments?

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© Take Charge Today – August 2013 – Spending Plans – Slide 31Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Spending Plan Guide10%

7%

30%

20%

15%

18%Saving and Investing10%

Insurance 7%

Housing 30%

Transportation 20%

Food 15%

Other 18%

What variables may cause these percentages to be different?

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© Take Charge Today – August 2013 – Spending Plans – Slide 32Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona

Summary

• A spending plan is an important financial planning tool▫ Helps achieve goals

• Make your spending plan work for you

• Make sure to control, evaluate, and adjust your spending plan

Step 1 - Track Current Income and

Expense

Step 2 -Personalize Your Spending Plan

Step 3 -Allocate

Money to Each Category

Step 4 -Implement and

Control

Step 5 - Evaluate and Make

Adjustments