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BUDGETING

BUDGETING. How Will You Use Your Money? Chapter 6. BUDGET A spending and savings plan based on an estimate of income and expenses . PURPOSE To help you live within your means; save toward goals. TRACK INCOME AND EXPENSES. CHOOSE FINANCIAL GOALS. THE BUDGET PROCESS. CREATE

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BUDGETING

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  1. BUDGETING How Will You Use Your Money? Chapter 6

  2. BUDGET A spending and savings plan based on an estimate of income and expenses. PURPOSE To help you live within your means; save toward goals.

  3. TRACK INCOME AND EXPENSES CHOOSE FINANCIAL GOALS THE BUDGET PROCESS CREATE YOUR BUDGET FOR THE YEAR PREPARE BUDGET WORKSHEETS REVIEW AND ADJUST YOUR BUDGET WORKSHEET

  4. CHOOSE FINANCIAL GOALS • Short-term Goals: • things you hope to achieve within a year. Controlling short-term spending is crucial to long-term financial or career success • Long-term Goals: • things you want to achieve over more than a year. Both are crucial to achieving your life-span goals.

  5. CHOOSE FINANCIAL GOALS • Your Goals Affect Others • Consider other people’s goals as well as your own • Your current family • Your future family • Your community Budgeting requires trade-offs and opportunity costs. A good budget allows you to enjoy yourself now and helps you achieve what you want most over your life span.

  6. Track Income and Expenses Keep Financial Records • Track Your Income • Paycheck, allowance, gifts, other sources • Track YourSpending • Sales receipts, credit statements, checking acct. statement **This may take a month or so to get accurate records**

  7. Track Income and Expenses Establish a Filing System • File Folders labeled for categories of income and expenses. • Computer Software Programs • i.e.. clothes, entertainment, paycheck stubs, bank statements and misc. **Good record keeping will help you control your financial life**

  8. Track Income and Expenses Effective Record Keeping • Should be organized, complete and easy to find. • To be useful, you must observe a budget’s limits. Regularly compare your actual spending with your budget’s estimates. **The purpose of keeping records is to use them to help you plan and to control your spending to reach your goals.

  9. Track Income and Expenses Fixed Expenses • Amounts you are committed to spend. • i.e. rent, mortgage, car pymt., utilities, insurance, taxes Flexible Expenses • Amounts you can choose to spend or not to spend (vary in amount and frequency) • i.e. designer clothes, new shoes, things you don’t need, groceries (make substitutes), entertainment. Luxury Goods: goods that have special qualities that make them more expensive than alternative goods

  10. PREPARE BUDGET WORKSHEETS Steps in Preparing Your Worksheet • Create a Worksheet (p.207) • Estimate Your Income • Estimate Your Expenses & Savings • Record Your Actual Income & Expenses • Calculate the Differences

  11. PREPARE BUDGET WORKSHEETS Budget Pitfalls • Too much detail becomes too much trouble • Keep it simple • Incorrect estimates of flexible expenses • Too many expenses under Miscellaneous • Giving up because it’s time consuming • Set aside time each week

  12. CREATE YOUR BUDGET FOR THE YEAR Evaluate Your Budget Worksheet • Adjust Your Spending • Flexible spending categories • Make Several Plans • So several worksheets to see what works for you and your goals

  13. CREATE YOUR BUDGET FOR THE YEAR Budgeting for the Year • Will help you plan steps toward major goals that may take many years to achieve • Review and Adjust Your Budget • Job loss, promotion, health issues, college, house, life events… • Goal changes Budgeting helps safeguard from going into too much debt as well as help in achieving your goals

  14. Making Decisions Ch. 1 p. 11-16 SPECIFY search sift A Rational Buying Decision is a choice made in an organized, logical manner. select study

  15. Making Decisions • SPECIFY: Identify theneed or wantthat you are trying to fulfill. Determine your goals. • SEARCH: Planspecific steps to gather information. • Impulse purchases: purchases made on a whim, without using a decision making process. • SIFT: Look at all your options. Look at your opportunitycosts. • SELECT: Make a choice and act on it. • STUDY: Evaluate the result.

  16. By using the decision making process, you will increase your chances of buying the product that fits your needs and wants best • Budget • Set Your Priorities • Evaluate Your Alternatives

  17. Consumer Reports A non-profit magazine devoted to testing, rating and reviewing products and services for consumers.

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