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Unit Three

Unit Three. Budget: Don’t Go Broke. Questions to Answer:. What is a Budget, how does it work, and how can it help you? How do taxes and other payroll deductions affect your paycheck? What does “P.Y.F” mean, and how can I benefit you? How can you make the best use of your cash?.

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Unit Three

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  1. Unit Three Budget: Don’t Go Broke

  2. Questions to Answer: • What is a Budget, how does it work, and how can it help you? • How do taxes and other payroll deductions affect your paycheck? • What does “P.Y.F” mean, and how can I benefit you? • How can you make the best use of your cash?

  3. What is a Budget? • Cash is the lifeblood of any business. Cash is to personal financial planning as gas is your car. Without either, you’re not going very far. • Tracking money just for the sake of tracking is pretty meaningless. It make more sense to track money when you have a plan for it. • That is the purpose of a budget (sometimes called a spending/savings plan.) • A BUDGET is a plan for managing your money during a given period of time.

  4. Money Going Out • Expenses – the money you spend on your needs and wants usually falls into one of two categories: • Fixed – have set dollar amounts and are the exact amount every time. i.e. Mortgage, car payments, etc. • Variable – can change, which means you usually have more control over them. i.e. gas for your car, movies, video rentals, eating out, etc.

  5. Cash Management • How you handle money coming in and money going out – sometimes referred to as “cash flow.” • One of the best tools to help manage your money is a budget. Basically, a budget is your roadmap to achieving your goals – when you are in control of your spending you are able to make clear, planned decisions on the best way to spend your money and make you money work for you.

  6. Like most people, with a job, your money is limited. One can work only so many hours a week at a job – which limits your income. Must be thoughtful about how you spend your “take-home pay.” • With the help of a budget, you have the opportunity to use your decision-making skills and choose how to spend your money.

  7. Budget is simple and has two parts: Income and Expenses The trick is simply to balance the two. When they’re in balance, you are on your way to meeting your financial goals. When they are not in balance, you have more money going out then coming in, which often results in debit.

  8. P.Y.F “Pay yourself first” • You don’t have a choice about paying taxes, you can control the amount to some degree – government still gets its taxes. • P.Y.F is the secret to getting what you want and becoming a disciplined saver. • Is a simple trick almost every self-made wealthy person uses, follow the same principle – don’t give yourself a choice. Make it a regular part of you budget. Think of it as a bill you owe yourself! It is the P.Y.F. money in your plan that helps you reach your goals.

  9. Making the Most of your Dollars Ways to make your dollars go father: • Shop for items on sale. • Buying and selling items through online auctions. • Using coupons when purchasing items. • Bargains at garage sales and thrift stores. • Learn how to evaluate products and services – Consumer Reports. • Using cost/benefit analysis – where you weigh the cost of a product or service against the benefit it provides.

  10. Other Tools to Help You Handle Your Cash Transaction Services: • Checking accounts • ATM card • Debit card – “electronic” check

  11. Checking Accounts • Banks or Credit Unions • Can have charges, fees and other cost added on: • Minimum balances • Annual or monthly fees • Overdraft protection • Insufficient funds charges • ATM fees

  12. The Envelope System • Simple system used to help manage your cash. • Label an envelope for each spending category of your budget ( savings, food, gas, etc.) • Record the planned amount on each envelope. • When you get income – put the planned amount in each envelope. • When you need to spend money – take it out of each respective envelope and write the date, amount and reason on the envelope.

  13. Record Keeping • As one gains more financial experience – will have more accounts and obligations. • One needs to develop the habit of staying financially organized. A small stack off manila folders makes a neat and organized filing system. • Here are some records one will want to keep:

  14. Checking Account Statements • Savings and Investment Statements • Insurance – “declarations” page • Tax documents • Pay Stubs • Loan papers • Big-ticket item receipts and warranties

  15. What You Have Learned • The benefits of a budget, what it is , and how it works. • The difference between income and expenses. • How taxes and other payroll deductions affect your paycheck. • The importance of P.Y.F • How basic tools like a checking account or the envelope system can help your budget work for you.

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