Budgeting and savings
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Budgeting and Savings. Anne Marie Anderson, CPA & SIFE. Embrace your budget!. Goal setting Short-term (< 3 months) Present for boy/girl friend Duke Nukem video game Intermediate (3 months – 1 year) iPad Phone Long-term (> 1 year) Car 4 year college. Construct your budget.

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Budgeting and Savings

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Budgeting and savings

Budgeting and Savings

Anne Marie Anderson, CPA

& SIFE


Embrace your budget

Embrace your budget!

  • Goal setting

    • Short-term (< 3 months)

      • Present for boy/girl friend

      • Duke Nukem video game

    • Intermediate (3 months – 1 year)

      • iPad

      • Phone

    • Long-term (> 1 year)

      • Car

      • 4 year college


Construct your budget

Construct your budget

  • Determine your time frame

  • Income

    • Gross vs net pay

      • Who is FICA and why does he take all my money?

    • Understand all items being taken out of your paycheck


Construct your budget cont d

Construct your budget (cont’d)

  • Expenses

    • Fixed

    • Variable

    • Out of pattern

    • Goals as expenses

    • Savings

    • Fun!

  • Needs vs. wants


Budget next steps

Budget - Next steps

  • Evaluate your budget (positive/negative cash flow)

  • Monitor over time

    • Make adjustments as needed

    • Be flexible


Nj h ypothetical budget

NJ Hypothetical Budget

  • Income - ??????

  • --Expenses:

    • $400,000 NJ home, 30 year mortgage, $10K taxes


Nj h ypothetical budget month

NJ Hypothetical Budget - Month

  • Income - ??????

  • --Expenses:

    • $2,800 Mortgage/Real estate tax

    • $300 Utilities

    • $150 Phone/Cable/Internet

    • $250 Car/Home Insurance

    • $200 Gas

    • $75 Clothes

    • $200 Food/Groceries

  • Total Expenses = $3,975


Nj hypothetical budget month cont d

NJ Hypothetical Budget – Month (cont’d)

  • Breakeven:

    • Net pay = Expenses, so you must bring home $3,975 per month or $47,700 per year to breakeven

  • $47,700 net pay is ≈ $70,000 gross pay after Federal, state, and FICA taxes

  • What did I leave out?


How to stick to the budget

How to Stick to the Budget

  • Goals on index cards – put them in the cash or credit card slot of your wallet

  • Make a picture of your goal the backdrop of your computer

  • Tell friends/relatives of your goals so they can help reign you in

  • Envelope system…..


Savings financial planning

Savings/Financial Planning

  • Where to put what you save….

    • 401K

    • Roth accounts

    • CD’s

  • Some places are better than others, but starting to save early is the key


You can never catch up

You Can Never Catch Up

Person A: Saves $2000 per year from age 22 to age 35 and then stops

Person B: Starts saving $2000 per year beginning at age 35 and never stops

Both earn 8% on their investments.

At age 75:

Person A has $1M in savings

Person B has $561K in savings


How to save

How to Save

  • College students – I don’t have money to save!

    • Where can you cut?

    • Break your habits!

  • Include savings as an expense item in your budget - out of sight/out of mind

  • Direct deposit – split a portion into savings

  • Coins count - $15 billion in loose change


Pitfalls

Pitfalls……

  • Credit cards……..

    • Be wary, credit card companies prey on college students.

    • Rule of thumb – if you don’t have the cash to buy something, wait until you do!

    • Pay more than the minimum payments – ALWAYS!

    • Debt consolidation companies…..more harm than good?

    • Call credit card companies directly


Did you know

Did you know?

  • The average person spends money 3 times a day.

  • Putting aside every coin you touch results in saving about $50 a month.

  • A $5 sandwich usually has less than $1 of ingredients.

  • Some 40% of American families annually spend more than they earn.

  • Americans spend more than 40% of their food dollars each year eating out.

  • One out of every four Americans believe their best chance of getting rich is by playing the lottery.

  • The average interest rate on credit cards is 18.9%.


Some helpful resources

Some helpful resources

  • College Money Insider

    • http://www.overturemarketplace.com/insider

  • Managing your money while in college

    • http://moneyfor20s.about.com/od/makethemostofyourmoney/tp/collegemoney.htm

  • 360 degrees of Financial Literacy

    • http://www.360financialliteracy.org/Life-Stages/College-Students

  • Debt consolidators (reputable ones…)

    • http://www.360financialliteracy.org/Topics/Credit-and-Debt/Credit-Cards/I-m-one-of-those

  • Student budget calculator

    • http://www.360financialliteracy.org/Topics/Budgeting-Spending/Budgeting-and-Saving/Student-Budget

  • Feed the Pig

    • http://www.feedthepig.org


A final thought

A final thought…..

  • http://www.youtube.com/watch?v=gZkuWLdSpuk


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