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1 0011 0010 1010 1101 0001 0100 1011 Unit 2: Budgeting

Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Page 1: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

10011 0010 1010 1101 0001 0100 1011

Unit 2: Budgeting

Page 2: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Chapter 6.1

Choose Financial Goals

Page 3: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Types of Financial Goals

• Money gives you purchasing power

– Money you earn is in the form of income

• People should make and follow a financial

plan

– A budget is a financial plan for dividing your

income between saving and spending options

Page 4: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Types of Financial Goals

• Short- and Long-Term Financial Goals

– Short-Term = Goals to happen � year

• Short-Term Goals can usually be achieved quickly

with limited planning

– Long-Term = Goals to happen � year

• Long-Term Goals usually require larger amounts of

money and more planning

Page 5: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Types of Financial Goals

• Examples of Short-Term Financial Goals

– Taking a vacation this summer

– Buying a new pair of jeans this weekend

– Saving money for Christmas presents

Page 6: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Types of Financial Goals

• Examples of Long-Term Financial Goals

– Paying for college

– Purchasing a home

– Putting money into a retirement fund

Page 7: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Types of Financial Goals

• It is important to balance short-term spending

with long-term success

– What does this mean?

– If you only spend money for short-term,

immediate spending, you will fail to save money

which will help you eventually achieve long-term

goals

Page 8: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Types of Financial Goals

• Budgeting is one way to ensure we balance

short-term spending with long-term success

– Budgeting requires trade-offs and opportunity costs

• How do you make a good budget?

Page 9: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Types of Financial Goals

• A successful budget…

– Understand your life-span goals

– Prioritize your life-span goals

– Rank your life-span goals

Page 10: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Chapter 6.2

Track Income and Expenses

Page 11: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Keep Financial Records• Track your income

– Paycheck stub

– Written account of allowances and income from

other sources where you don’t receive a pay stub

– Bank statements with records of interest earned

Page 12: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Keep Financial Records

• Track your spending

– Sales receipts

– Credit card statements

– Bank statements from checking and saving

accounts

Page 13: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Keep Financial Records

• Establish a filing system

– Categorize spending

– Paper or computerized

• Keep effective records

– Filing system should be organized and neat

Page 14: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Keep Financial Records

• Using financial records efficiently

– Study records of your earning and spending to

develop a successful budget

– See where spending habits could be controlled

in order to reach long-term goals more quickly

Page 15: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Fixed v. Flexible Expenses

• Both will need to be included in your

budget

• Fixed Expenses

– Spending that you have committed to make

• Flexible Expenses

– Spending you can choose to make

Page 16: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Fixed v. Flexible Expenses

• Fixed Expenses

– Let’s say you purchase a car…

• Your car payment is a fixed expense

• Your car insurance is a fixed expense

• These expenses are due on a specific date, and the

amount is usually constant

Page 17: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Fixed v. Flexible Expenses

• Flexible Expenses

– Things you choose to spend money on

• A new CD or MP3 Player

• Designer jeans

• Soda and junk food

• Movie tickets and popcorn

Page 18: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Fixed v. Flexible Expenses

• Flexible Expenses

– Although everyone NEEDS food and clothing –

we have choices on spending for these

necessities

• Generic brands v. Name brands for example

• Name brands also known as Luxury Goods

Page 19: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Fixed v. Flexible Expenses

• Flexible Expenses

– Luxury Goods

• Items that have special qualities that make them

more expensive than alternative goods

• Diamond v. Cubic Zirconium

• Hollister Jeans v. Levi’s

Page 20: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Chapter 6.3

Your Budget Worksheet

Page 21: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Create Your Budget Worksheet

• What is a Budget Worksheet?

– A planning document in which you record

expected and actual income and your short-term

spending habits

• Usually for a period of one month

• Compare how you THINK you will spend your

income v. how you ACTUALLY spend it

• MOST people spend more than they think they

will

Page 22: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Create Your Budget Worksheet

• Step 1

– Create your worksheet

• 4 Columns

• Column 1: Income and Expenses (Spending

Categories)

• Column 2: “Expected Amount”

• Column 3: “Actual Amount”

• Column 4: Over or Under Amount (+ or -)

Page 23: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Create Your Budget Worksheet

• Step 2

– Estimate your Income

• Be sure to always use NET income not GROSS

income

– WHAT IS THE DIFFERENCE??

• Include income from other sources

– Allowances

– Odds Jobs that you are committed to performing

Page 24: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Create Your Budget Worksheet

• Step 3

– Estimate your Expenses and Savings

• List Fixed and Flexible Expenses

• Plan your Saving

– Do not just “save” whatever is left over at the end of a

month

– Plan a fixed amount to save every month

Page 25: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Create Your Budget Worksheet

• Step 4

– Record your Actual Income and Expenses

• During the month, as you receive your income and

pay your expenses, record those “actual” amounts on

your Budget Worksheet

Page 26: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Create Your Budget Worksheet

• Step 5

– Calculate the Difference

• Compare what you wrote for expected income and

expenses to actual income and expenses

• SUBTRACT the expected amount from the actual

amount

– Record the difference in the Over or Under column

– Make sure if the difference is negative you use the (-)

symbol!

Page 27: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Budget Pitfalls

• Few consumers have realistic budgets!

– They are too specific, and become too much

trouble.

– Unrealistic predictions of income & expenses

– Don’t lump too many things under your

miscellaneous expenses – Categorize!

– Consumers simply give up – Plan time each

week to maintain your budget!

Page 28: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Chapter 6.4

Create Your Budget

for the Year

Page 29: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Evaluate your Budget Worksheet

• Adjust your Spending

– Reduce flexible expenses when you can

• Make several “plans”

– Each plan should give you different choices

– i.e. Less flexible spending, more saving

Page 30: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Budgeting for the Year

• REMEMBER: The purpose of a budgeting

worksheet is to help you understand your

spending and saving habits

• Budgeting for a year can help you plan

steps in achieving long-term goals

Page 31: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Budgeting for the Year

• A budget worksheet for a year combines

your income, expenses, and savings for a

full year

• Total Income = Expenses + Savings

– Review and adjust your budget so the equation

is equal!

Page 32: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Budgeting for the Year

• Relate your goals to your budget

– i.e. If a long-term goal is college, saving money

specifically for college every year is important

– Adjust for changing goals

• Your goals will change with time – so should your

budget!

Page 33: Unit 2: Budgeting 1 - Waunakee High School · Unit 2: Budgeting. 1 0011 0010 1010 1101 0001 0100 1011 Chapter 6.1 Choose Financial Goals. 1 0011 0010 1010 1101 0001 0100 1011 Types

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Budgeting for the Year

• Prepare a family budget

– Many families share income and expenses, so

plan a budget together

– Compromise!

• In order for some long-term goals to be met, other

goals may have to be given up or set back