Part 6—Managing Your Part 6—Managing Your IncomeIncome

Chapter 24Chapter 24

Managing Managing SpendingSpending

Chapter ObjectivesChapter Objectives

PreparePrepare a budget to help you manage your a budget to help you manage your money wisely.money wisely.

IdentifyIdentify and useand use reliable sources of consumer reliable sources of consumer information.information.

ExplainExplain the methods businesses use to promote the methods businesses use to promote goods and services.goods and services.

MakeMake decisionsdecisions about where and how to shop. about where and how to shop. DescribeDescribe your consumer rights and your consumer rights and

responsibilities.responsibilities. ExplainExplain how your consumer rights are protected. how your consumer rights are protected. DemonstrateDemonstrate ways to avoid consumer fraud. ways to avoid consumer fraud.

Key ConceptsKey Concepts

A budget helps you manage your income A budget helps you manage your income and expenses.and expenses.

Consumer resources are available to help Consumer resources are available to help you make wise shopping choices.you make wise shopping choices.

As a consumer, you have certain rights As a consumer, you have certain rights and responsibilities.and responsibilities.

You can take steps to protect yourself You can take steps to protect yourself from becoming a victim of consumer from becoming a victim of consumer fraud. fraud.

Budgeting Your MoneyBudgeting Your Money

Budget:Budget: A written A written plan to help you plan to help you make the most of make the most of the money you the money you have.have.

Your budget will Your budget will make you more make you more aware of how and aware of how and why you spend why you spend your money.your money.

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Budgeting Your MoneyBudgeting Your Money

Five steps of budget development:Five steps of budget development: Establish financial goals.Establish financial goals. Estimate your monthly income and expenses.Estimate your monthly income and expenses. Balance your budget.Balance your budget. Keep track of income and expenses.Keep track of income and expenses. Evaluate the budget.Evaluate the budget.

Establish Financial GoalsEstablish Financial Goals

Set short- and long-range goals.Set short- and long-range goals. Set up an Set up an emergency cash fundemergency cash fund to cover to cover

unexpected expenses.unexpected expenses. Emergency cash fund:Emergency cash fund: Fund that covers Fund that covers

unexpected expenses.unexpected expenses. Estimate the cost of each goal and when Estimate the cost of each goal and when

you want to attain them.you want to attain them. Calculate how much money you would Calculate how much money you would

have to set aside each month to achieve have to set aside each month to achieve your goals.your goals.

Estimate Your Monthly Estimate Your Monthly Income and ExpensesIncome and Expenses

Estimate your income, but be conservative.Estimate your income, but be conservative. List all potential expenses.List all potential expenses.

Fixed expenses – expenses that must be paid regularly.Fixed expenses – expenses that must be paid regularly. Flexible expenses – all other expenses that you pay Flexible expenses – all other expenses that you pay

differing amounts.differing amounts.

Balance Your BudgetBalance Your Budget

Balance your budget by subtracting your Balance your budget by subtracting your expected expenses from your expected expected expenses from your expected income.income.

If your expenses are greater than your If your expenses are greater than your income, you should increase your income income, you should increase your income or decrease your expenses.or decrease your expenses.

Your budget is balanced when your Your budget is balanced when your expenses equal your income.expenses equal your income.

Keep Track of Income Keep Track of Income and Expensesand Expenses

Compare your actual income to your Compare your actual income to your estimated income and record the difference.estimated income and record the difference.

Compare your actual expenses to your Compare your actual expenses to your estimated expenses and record the difference.estimated expenses and record the difference.

Evaluate the BudgetEvaluate the Budget

Evaluate the budget to see if it is working for you.Evaluate the budget to see if it is working for you. If you are overspending in any area, the budget If you are overspending in any area, the budget

needs adjusting.needs adjusting. As your goals change, your budget will also have As your goals change, your budget will also have

to change.to change.

Managing Your Consumer Managing Your Consumer SpendingSpending

To manage your consumer spending To manage your consumer spending wisely, it is important to:wisely, it is important to: Be an informed consumer.Be an informed consumer. Understand advertising and other promotional Understand advertising and other promotional

methods.methods. Know where to shop.Know where to shop. Know how to shop.Know how to shop.

Be an Informed ConsumerBe an Informed Consumer

Consumers:Consumers: People People who use their who use their income to buy income to buy items they need items they need and want.and want.

Goods:Goods: Any type of Any type of product consumers product consumers buy.buy.

Services:Services: Any type Any type of work consumers of work consumers pay to have done.pay to have done.

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Be an Informed ConsumerBe an Informed Consumer

Consumer resources include:Consumer resources include: People – talk to people who have used the product.People – talk to people who have used the product. Places – school and local library.Places – school and local library. Organizations – U.S. Consumer Information Center, Organizations – U.S. Consumer Information Center,

Consumers Union.Consumers Union. Printed materials – advertisements, product labels Printed materials – advertisements, product labels

and tags, use and care guides, warranties.and tags, use and care guides, warranties. Warranty:Warranty: A written promise that guarantees A written promise that guarantees

a product will meet certain performance and a product will meet certain performance and quality standards.quality standards.

Service contract:Service contract: An extended warranty. An extended warranty.

Understand Advertising and Understand Advertising and Other Promotional MethodsOther Promotional Methods Businesses advertise in various forms of Businesses advertise in various forms of

media to inform you about their goods and media to inform you about their goods and services.services.

Use ads to compare products and prices.Use ads to compare products and prices. Beware of false or misleading ads.Beware of false or misleading ads.

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Understand Advertising and Understand Advertising and Other Promotional MethodsOther Promotional Methods Special sales offer goods and services at Special sales offer goods and services at

discounted prices to attract customers and discounted prices to attract customers and increase sales.increase sales.

Businesses use promotions to bring Businesses use promotions to bring attention to a product or service through attention to a product or service through advertising or publicity.advertising or publicity.

Buying incentives such as coupons, prizes, Buying incentives such as coupons, prizes, and in-store games are also used to help and in-store games are also used to help sell products.sell products.

Decide Where to ShopDecide Where to Shop

Types of shopping Types of shopping choices include:choices include: Retail shopping.Retail shopping. Direct selling.Direct selling. Catalog and mail-order Catalog and mail-order

shopping.shopping. Television shopping.Television shopping. Internet shopping.Internet shopping.

Developing Shopping SkillsDeveloping Shopping Skills

Developing good shopping skills takes Developing good shopping skills takes practice.practice.

Making a list and planning ahead will help you Making a list and planning ahead will help you avoid impulse buying.avoid impulse buying.

Impulse buying:Impulse buying: Making an unplanned Making an unplanned purchase.purchase.

Comparison shopping:Comparison shopping: Looking at several Looking at several brands at different stores to compare prices, brands at different stores to compare prices, quality, and features.quality, and features.

Comparison shopping helps you save money, Comparison shopping helps you save money, get better quality, and find the most suitable get better quality, and find the most suitable products.products.

Exercising Your Consumer Exercising Your Consumer Rights and ResponsibilitiesRights and Responsibilities

Consumer rightsConsumer rights

InformationInformation

SelectionSelection

PerformancePerformance

SafetySafety

RecourseRecourse

Consumer responsibilitiesConsumer responsibilities

Find and use information before Find and use information before buying goods and services.buying goods and services.

Choose goods and services Choose goods and services wisely.wisely.

Follow instructions and use Follow instructions and use products for their intended use.products for their intended use.

Use products safely.Use products safely.

Tell businesses or sellers what Tell businesses or sellers what you like and dislike about their you like and dislike about their products and services.products and services.

Know the Right Way to Know the Right Way to ComplainComplain

Recourse:Recourse: The right to complain and The right to complain and receive some response.receive some response.

If there is a problem with a product or If there is a problem with a product or service you bought, complain to the right service you bought, complain to the right person immediately.person immediately.

Write a complaint letter to the company’s Write a complaint letter to the company’s consumer affairs department if your consumer affairs department if your problem is not settled.problem is not settled.

Use Consumer Protection Use Consumer Protection ServicesServices

If the results of your complaint are If the results of your complaint are unsatisfactory, you can contact one of the unsatisfactory, you can contact one of the following consumer organizations:following consumer organizations: Better Business Bureau (BBB).Better Business Bureau (BBB). News media.News media. Consumer action groups.Consumer action groups.

Better Business Bureau (BBB):Better Business Bureau (BBB): A nonprofit A nonprofit organization sponsored by private organization sponsored by private businesses that tries to settle consumer businesses that tries to settle consumer complaints against local business firms.complaints against local business firms.

Use Government Protection Use Government Protection AgenciesAgencies

Consumer Product Safety Commission (CPSC):Consumer Product Safety Commission (CPSC): Investigates consumer complaints about product Investigates consumer complaints about product safety.safety.

Food and Drug Administration (FDA):Food and Drug Administration (FDA): Regulates the Regulates the production, packaging, and labeling of food, drugs, production, packaging, and labeling of food, drugs, and cosmetics.and cosmetics.

Federal Trade Commission (FTC):Federal Trade Commission (FTC): Helps prevent Helps prevent unfair competition, deceptive trade practices, and unfair competition, deceptive trade practices, and false advertising.false advertising.

Federal Communications Commission (FCC):Federal Communications Commission (FCC): Handles complaints about telephones, radio, TV, Handles complaints about telephones, radio, TV, and cable.and cable.

Consumer FraudConsumer Fraud

Consumer fraud:Consumer fraud: The use of trickery or The use of trickery or deceit to gain some type of unfair or deceit to gain some type of unfair or dishonest advantage over the consumer.dishonest advantage over the consumer. Identity theft.Identity theft. Prizes and sweepstakes.Prizes and sweepstakes. Internet services.Internet services. False advertising.False advertising. Fake charities.Fake charities. Investment scams.Investment scams.

Identity TheftIdentity Theft

The use of another’s name and personal The use of another’s name and personal information such as social security information such as social security number, address, or credit card numbers.number, address, or credit card numbers.

Skimming:Skimming: Stealing a credit card number Stealing a credit card number during checkout.during checkout.

Phishing:Phishing: Tricking someone into giving out Tricking someone into giving out personal and financial information.personal and financial information.

Avoiding Consumer FraudAvoiding Consumer Fraud

Check out companies carefully before Check out companies carefully before doing business with them.doing business with them.

Do not give out your social security Do not give out your social security number or account information.number or account information.

Shred or file receipts.Shred or file receipts. Review bills and invoices before paying Review bills and invoices before paying

them.them. Do not open questionable e-mail Do not open questionable e-mail

messages.messages.

Thinking BackThinking Back

How do you prepare a How do you prepare a budget?budget?

What are reliable What are reliable sources of consumer sources of consumer information?information?

What are your What are your consumer rights and consumer rights and responsibilities?responsibilities?

What can you do to What can you do to avoid becoming a avoid becoming a victim of consumer victim of consumer fraud?fraud?