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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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Presentation Transcript
slide2
Homework

(Passport page 22)

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
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
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

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
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
slide28
What Have You

Learned?

(Post-Test page 24)

slide29
Homework

(Passport page 32)

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