Money Management: Part 1

1. Money Management: Part 1

2. Homework

3. How’s It Going?

4. Money Management • Tracking our Spending • Setting Goals • Creating a Budget

5. What Do You Know?

6. Let’s Talk About You

7. Did You Know? • 56% of U.S. households don't have a budget. • Over 11 million adults don’t monitor their overall spending and don’t know how much they spend on food, housing, and entertainment. • 28%, or nearly 64 million adults, admit to not paying all of their bills on time. Source: April 2010Consumer Financial Literacy Survey by Harris Interactive, Inc

8. Steps to Creating a Budget • Track spending habits • Set priorities for Goals • Include Periodic Needs • Write it down • Adjust

9. Types of Expenses • Fixed • Variable • Periodic • Discretionary • Non-discretionary

10. Setting Goals • Short-Term Goals: less than one year • Long Term Goals: more than one year • S.M.A.R.T. Goals

11. S.M.A.R.T. Goals • Specific: State exactly what is to be done • Measurable: Include how the goal can be measured • Actionable: Determine steps to reach the goal • Realistic: Do not set goals for something unrealistic • Time Bound: State when the goal will be met

12. S.M.A.R.T. Financial Goals • Goal: I want to buy a new car • S.M.A.R.T. goal: • Specific: I want to save money for a down payment on a new car • Measurable: I need to save $2,000 for the down payment • Actionable: I will save $50 from every paycheck ($100 a month) • Realistic: I usually spend $200 a month on dining out and coffee drinks, so I’ll cut that spending in half and put the rest towards my down payment • Time Bound: I want to have the $2,000 saved in two years

13. S.M.A.R.T. Financial Goals Budgeting • Identify the cost and the timeframe for the goal: • Example: I want to save $3000 over the next two years for a down payment on a new car. • Break the cost into annual costs • $3000 for 2 years = $1,500 per year • Divide annual cost by 12 to get monthly amount needed: • $1500/12 = $125 monthly

14. Budgeting Process

15. Tracking Your Spending • Write down where your money goes ~ every dime, every dollar. • Consider the automatic spending that you may have in place (payroll withholdings, EFT payments, child support, etc). • Track it for a minimum of two weeks. • Where are your temptations? What needs to be controlled? • Is it a want or a need?

16. Tracking/Collecting Data

17. Write It Down Income • Payroll • Child support Expenses • Fixed • Variable • Periodic

18. Separating Wants and Needs

19. Organize Data

20. Spending Tracker By Category

21. Creating YOUR Budget • Your spending trackers. • Remember, you’ll need at least two weeks worth of data, but more is even better. • Use historical data from paystubs, bank and credit card statements. • Your S.M.A.R.T. goals and other priorities (paying off debt, vacation, etc). • Be sure to bring how much money you’ll need for these. • Your income and expenses ~ fixed, variable and periodic

22. Add Periodic Expenses and Goal Savings

23. Building the Budget

24. Balancing the Budget

25. Net Worth Assets Cash Accounts Investments House Car Personal Property Liabilities Debts Credit Cards Auto Loan Mortgage Assets – Liabilities = Net Worth

26. Financial Statements Spending Plan Net Worth Short Term Long Term

27. Homework

28. Questions?