2. “Some Money Facts”
►$ The average person spends money three
times a day.
► $ A movie with popcorn and a soft drink
can easily cost $20
► $ Just one soft drink a day for .99c adds
up to $361.35 in a year
► $ What’s the biggest expense item for
teenagers? FOOD!
3. Money Matters:
► How many times a day do you spend money?
► The average person spends money 6 times a day.
► Money brings happiness – Money problems bring
unhappiness
► Money problems stay with you for the rest of your
life.
► Top reason for divorce is financial. Finances
affects everything else in your life.
4. Ways to improve your finances
► Make more money
► Cut your expenses
► “Wait and win the
lottery” system
► Have a budget
5. What is a budget?
►A tool to manage your money
► For a specific period of time – usually
monthly
► Budget due to our limited resources
► Helps us meet our responsibilities and
our financial goals
6. Reasons for a Budget
Track spending
Money toward expenses/bills
Avoid careless spending
Eliminates stress
Live within your means/income
Meet financial goals
Save
Invest
…Puts you in control of your financial future,
beginning NOW.
7. Without a Budget…
Have no plan
Paycheck-to-paycheck
Come up short
Plan for emergencies
No savings/investing plans
Less likely to know what $ you have
8. How to Build a Budget
1. Decide on a time frame for tracking expenses
(monthly)
2. List all money you have coming in (income)
A. Disposable income
B. Discretionary income
3. PYF (Pay yourself first) = Savings
4. Make categories for all expenses
5. Subtract total expenses from income
6. Study budget and make changes
9. PAY YOUR$ELF FIRST!
Every time you PYF, you are developing a
saving habit that leaves you with more
money to spend later on for things that are
really important to you!
Save 10% of your disposable income each
time you get paid
10. Budgeting Terms
► Expenses:
► Budget – tool for Fixed expenses –
money management monthly contractual
► Disposable income – Variable expenses –
after taxes not contractual, vary
► Discretionary income – each month
after all expenses paid Periodic fixed
expenses
11. Spending plan activity
► Decide if each item is income, a fixed
expense, variable expense or periodic
expense
17. What is included in a budget for a
family in a given month?
The typical family spends their money on:
►Housing - 30%
►Transportation - 20%
►Food -15%
►Utilities, Home Improvements - 14%
►Saving - 10%
►Insurance - 7%
►Other - 4%
18. What does it look like?
Budget Template
Income Amount
Wages $
Total Income $
Expenses Amount
Fixed Expenses
PYF (10%) $
Variable Expenses $
Periodic Expenses $
Total Expenses $
Net Gain or Net Loss $
19. Allocate money to each category
► Net gain - $ remaining to either save, spend or invest
► Net loss - spending more money than earning and has to
use credit (borrowed money) to meet their financial
obligations
► A spending plan should have income and expense
matching one another (reach zero)
20. Implement and Control
► There is not one correct control system.
Depends upon the individual/family
Envelope systems – individuals place the actual
budget amount of cash from a paycheck into a
specific envelope system for the expense
Check register system – helps consumers to track
all expenditures in a checkbook register which has
been divided into spending plan categories
Electronic spending plan systems – multiple
types of software are available for consumers to use
to help keep track of their financial records like
www.mint.com
21. Net worth statement
► A net worth statement describes an individual or
family’s overall financial condition on a specified date
► The components include:
Assets – Everything a person owns with monetary value
Liabilities – Debts or what is owed to others
Net worth - The amount of money left when liabilities are
subtracted from assets (indicates wealth)
22. Who is Wealthier?
John – earns $35,000 Alex – earns $100,000
per year per year
Assets Assets
Home $60,000 Home $75,000
Retirement $24,000 Retirement $35,000
Automobile $8,000
Automobile $8,000
Total Assets $118,000
Total Assets $92,000
Liabilities
Liabilities
College loan $10,000
College loan $6,000 Automobile loan $4,000
Mortgage $35,000 Credit card debt $20,000
Total $41,000 Mortgage $65,000
Liabilities Total Liabilities $99,000
Net Worth $51,000 Net Worth $19,000