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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

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