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Budgeting. “Pay Yourself First”. Personal Budget. Working Tool Take Control Directs flow of cash received towards financial goals Must be Flexible! Takes discipline. Creating a Budget. ?. Reasons for a Spending Plan. …Helps you determine where you are spending your money currently.

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Budgeting

Budgeting

“Pay Yourself First”


Personal budget
Personal Budget

  • Working Tool

  • Take Control

  • Directs flow of cash received towards financial goals

  • Must be Flexible!

  • Takes discipline



?


Reasons for a spending plan
Reasons for a Spending Plan

  • …Helps you determine where you are spending your money currently.

  • …Helps you decide where to spend your money in the future.

  • …You have an organized way to save for things that cost more.

  • …Puts you in control of your financial future, beginning NOW.


People without a budget
People Without a Budget…

  • …Are less likely to know what they have.

  • …Have no plan, often coming up short before their next paycheck or allowance.

  • …Are almost certain to have no plan to save for more expensive spending goals.


Pay your elf first
PAY YOUR$ELF FIRST!

S

etting aside money for “big ticket items”

A

voids borrowing, which costs you a lot! It’s a

V

ery wise thing to do, because

E

very time you pay yourself first, you are developing asaving habitthat leaves you with more money to spend later on for things that are really important to you!


2 parts of budgeting
2 Parts of Budgeting

  • 1. Income: Money Received from any source (limited source)

  • 2. Expenses: Money spent to satisfy needs/wants


Gross vs net
GROSS VS NET

  • Gross pay is the total amount you earn before any deductions are subtracted.

    • $6.50 X40=$260.00

  • Net pay is the amount you “take home” after deductions.

  • Overtime is time worked beyond the regular hours

  • A standard workday is 8 continuous hours with scheduled breaks plus an unpaid lunch period.

  • A standard work week is 40 hours in a 5 day period of time.


Overtime
OVERTIME

  • Fair Labor Standards Act states that:

    • “employers must pay hourly workers for overtime at the rate of 1 1/2 times the regular rate of pay.”

  • So… if regular pay is $6.50, then overtime would be $9.75.

    • 40 hours X $6.50 = $260.00

    • 5 hours X $9.75 = $48.75

    • Gross pay = $308.75


Paycheck stub
Paycheck Stub

  • Salaried employees do not receive additional pay for overtime work.

  • Their gross pay is the same month after month.

  • The employer divides the salary into equal amounts for each pay period.

  • Under the “YTD” heading, your gross pay is added up throughout the year.


Income payroll deductions
Income- Payroll Deductions

  • Money subtracted from Gross Income:

    • Union Dues

    • Health Insurance

    • Savings plans

    • Taxes

      Taxes are the largest deductions-required by law


4 payroll taxes
4 Payroll Taxes

  • 1. Federal Income Tax

  • 2. State Income Tax

  • 3. Social Security Tax (FICA)

    • May be able to collect at age 62, average payout $1,230 per month

  • 4. Medicare Tax (FICA)

    • Can collect at age 65

  • FICA- Federal Insurance Contribution Act

    Employees match contributions of employers to SS


Progressive income tax
Progressive Income tax

  • Your tax bracket is the rate you pay on the taxable income that you earn

  • The U.S. uses a progressive tax rate. As a result, as the amount of money you earn increases so does the rate at which you are taxed. Tax Brackets

  • For example, if you earned $10,000 during the year,, then $8,700 would be taxed at 10% and the remaining $1,300 would be taxed at 15%. This works out to be a total of $1,065, which is less than it would be if the $10,000 was taxed at a flat rate of 15%, which would yield a total of $1,500 in income taxes.

  • http://www.forbes.com/sites/kellyphillipserb/2013/10/31/irs-announces-2014-tax-brackets-standard-deduction-amounts-and-more/


W 4 form withholding allowance certificate
W-4 Form Withholding Allowance Certificate

  • Purpose:

    • So your employer can withhold the correct federal income tax from your pay


Net pay
NET PAY

  • When all deductions are taken out of your gross pay, the amount left is your net pay.

  • Net pay is the amount of money you can actually spend.

  • Net pay is often called “take-home pay” because it is the amount you can actually use as you wish

  • Regular wages or salary + Overtime= Gross Pay

  • Gross Pay - Deductions = Net Pay



Federal w 2 wage tax statement
Federal W-2 Wage & Tax Statement

  • Employees receive at beginning of year (January-February)

  • Itemizes money earned & withheld by IRS

  • Based on previous year income

  • Employee can determine if paid too much/ too little to IRS

    • Tax refund- too much

    • Taxes owed- too little


IRS

  • Internal Revenue Service

  • Responsible for collecting taxes


When how to file your tax return
When & how to file your tax return

  • Single tax payers who earn less than $8,500 do not have to file a tax return

  • Gather your W-2 and any other documents you need

  • Complete a 1040EZ if you are single or married with no dependents and have income less than $50,00

  • Go to irs.gov for more info & forms

  • April 15 is the deadline to file!


2 nd part of budgeting expenses
2nd part of Budgeting: Expenses!

  • Money spent to satisfy needs/wants

  • Working Budget: Expenses & income balance

  • Expenses should not exceed income

  • Limited resources- choices on how to spend money

  • Opportunity costs vs. delayed gratification


Expenses included in budget
Expenses included in Budget

FIXED EXPENSES

VARIABLE EXPENSES

Examples: Gas,

Food, Entertainment costs, clothing

Can change month to month

  • Savings- PYF (Leftover approach never works)

  • Example: Car payment

  • Insurance

  • Same amount of payment each time


How to build a budget
How to Build a Budget

  • Decide on a time frame for tracking expenses (week, two weeks, month).

  • List all money you have coming in (income).

  • Make categories for all expenses.

  • Subtract total expenses from income.

  • Study your budget and your financial plan to make sure it fits with your plans and goals.


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