Money Management: Part 2
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Money Management: Part 2. Homework (Passport page 22). How’s It Going?. Budgeting Process. Building the Budget. Refining YOUR Budget. Determining what w orks for you Comparing a ctual to budget spending Considering guideline b udgets Deciding what to adjust

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Money Management: Part 2

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Money management part 2

Money Management: Part 2


Money management part 2

Homework

(Passport page 22)


How s it going

How’s It Going?


Budgeting process

Budgeting Process


Building the budget

Building the Budget


Refining your budget

Refining YOUR Budget

  • Determining what works for you

  • Comparing actual to budget spending

  • Considering guideline budgets

  • Deciding what to adjust

  • Finding creative ways to save on everyday items

  • Understanding net worth

  • Tackling debt


What do you know pre test page 4

What Do You Know?(Pre-Test Page 4)


Evaluating the budget

Evaluating the Budget

  • Same Income and Expenses

  • More Income than Expenses

    • May have overestimated income

    • May indicate there are some expenses not captured in your budget

  • More Expenses than Income

    • May have underestimated income

    • May need to adjust the spending plan to reduce expenses or increase income


Zero dollar budget

Zero Dollar Budget

  • Have every dollar spent on paper before the month begins

  • Plan expenses for the coming month

  • Rollover unspent money to the following months

  • Pay yourself first

  • Make a plan for extra money


The right system for you

The Right System For You

  • Envelope Method

  • Calendar Method

  • Register Method

  • Receipts Method

  • Budget Spreadsheet

  • Personal Finance Software


Financial pitfalls

Financial Pitfalls

  • Overcoming Temptations

    • Revisit Temptations List on Passport p. 15

    • Track Spending to monitor progress

    • Work together with family members

    • Be realistic

    • Allow yourself some limited guilty pleasure


Financial pitfalls cont d

Financial Pitfalls Cont’d

  • If you use a credit card to cover $1,000 of periodic expenses and repay the minimum payment at 24% interest:

    • Monthly payment: $40

    • Number of months in debt: 83 months (6 years and 11 months)

    • Total payments: $1,775

    • Interest paid: $775

  • If you charged $1,000 per year in periodic expenses over 3 years and repaid only the minimum, you would need 10 years and 6 months to repay the balance and would repay more than $1,575 in interest.


Variable income

Variable Income

  • Salary + Commission

    • Needs = Salary

    • Wants = Commission

  • Irregular Pay

    • Budget using lowest paycheck allocating to needs

    • Excess goes to wants

  • Overtime

    • Accelerate savings, goals or debt reduction

  • Prioritizing Wants and Needs Essential

  • Savings absolute MUST


Adjusting income

Adjusting Income

Short-Term

  • Extra Work

    • Overtime

    • Part-time supplemental

  • Review W-4

  • Sell Assets

    • Yard sales/Online sales

  • Develop Hobbies

    • Turn a craft or hobby into income

      Long-Term

  • Develop career path


Comparing actual vs budget

Comparing Actual vs. Budget


Using a guideline budget

Using a Guideline Budget


Financial decision tree

Financial Decision Tree


Savings

Savings

Periodic

  • set aside monthly amounts to fund periodic expenses

    Emergency

  • truly dire occurrences like job loss or a serious accident

    Retirement

  • IRAs, 401(k), etc.

    Goal Savings

  • S.M.A.R.T. Goals


Ways to save

Ways to Save

  • Food:

    • Limit eating out to special occasions

    • Make a grocery list

    • Use coupons

    • Join membership clubs/discount stores

    • Buy generic

    • Buy in bulk if you use large quantities

    • Bag lunch

    • Drink water when eating out

    • Your Ideas?


Ways to save cont d

Ways to Save – Cont’d

  • Clothing

  • Transportation

  • Shelter

  • Utilities

  • Entertainment


Net worth

Net Worth

Assets

Cash Accounts

Investments

House

Car

Personal Property

Liabilities

Debts

Credit Cards

Auto Loan

Mortgage

Assets (OWN) – Liabilities (OWE) = Net Worth


Financial statements

Financial Statements

Spending Plan

Net Worth

Short Term

Long Term


Priorities for spending

Priorities for Spending


Dealing with debt

Dealing with Debt

  • Debt impacts current spending

  • Debt delays savings goals

  • Make a plan to reduce debt

    • Evaluate debt

    • Prioritize debt

    • Create repayment plan

    • Celebrate success


Impact of minimum payments

Impact of Minimum Payments


Snowball method

Snowball Method

  • Pay off one debt by paying more than minimum

  • Apply payment from debt #1 to next debt as additional payment.

  • As debts pay off, continue to apply payments to next debt.

  • www.powerpay.org to create your snowball


Key elements

Key Elements

  • Keep it realistic

  • Include spending allowances

  • Use guidelines

  • Refer to your budget before spending money


Money management part 2

What Have You

Learned?

(Post-Test page 24)


Money management part 2

Homework

(Passport page 32)


Money management part 2

Questions?


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