Money Management Strategy

Money Management Strategy Chapter 3 Chapter 3 Business Finance - Mrs. Stice

Have you ever found yourself wondering what happened to a sum of money you had? Explain the circumstances. Chapter 3 Business Finance - Mrs. Stice

Look at the picture on page 61 When might this be a wise money management strategy? When might it make more sense to go ahead and buy the item, even if it’s not on sale? Chapter 3 Business Finance - Mrs. Stice

Money management is planning how to get the most from your money. Good money management can help you keep track of where your money goes so that you can make it go farther Chapter 3 Business Finance - Mrs. Stice

Trade off examples Water instead of ***** Attending school instead of ***** Paid attention in class instead of**** Spend money on clothes instead of**** Buy the newest technology now instead of***** Chapter 3 Business Finance - Mrs. Stice

Every time you make a decision, you are choosing one thing and rejecting another. Trade-offs are very common in financial decision making. Chapter 3 Business Finance - Mrs. Stice

Think about your own financial decisions this past week/month. Think about the trade offs that occurred. Discuss your decisions with a partner. Chapter 3 Business Finance - Mrs. Stice

How can you be sure of making the right decisions when you’re faced with tough opportunity costs? You may never know for sure, you can become a judge. Use your values, goals, an the state of your finances. Chapter 3 Business Finance - Mrs. Stice

Money Mangement ORGANIZED –what skills or what do you do to get organized for….. Schoolwork Homework, Bedroom car Chapter 3 Business Finance - Mrs. Stice

These skills can transfer to your financial life. Chapter 3 Business Finance - Mrs. Stice

Organizing Financial Document Organize your personal financial and non-financial documents What are some financial and non-financial documents that are important? Chapter 3 Business Finance - Mrs. Stice

Organizing Financial Document • Organize your personal financial and non-financial documents • Some are: • Bank statements, paycheck stubs, • car titles, birth certificates, • tax forms, passports etc. • Once your are organized, you will have better handle on your needs, wants, and financial position Chapter 3 Business Finance - Mrs. Stice

Where to Keep Your Documents • Home file • Simple, doesn’t take much space • Safe-deposit box • Small secure storage compartment that you rent at a bank • Computer Chapter 3 Business Finance - Mrs. Stice

Personal Financial Statements Section 3.2 Chapter 3 Business Finance - Mrs. Stice

Predict the math skills you think you would need to know in order to prepare personal balance sheets and cash flow statements in additions to calculating net worth. Chapter 3 Business Finance - Mrs. Stice

Personal Balance Sheet • Documents that provide information about your current financial position and present a summary of your income and spending • They can help you: • _________________________ • Measure progress toward your ________________ • Track your financial activities • Organize information that you can use when you file your tax return or apply for credit Chapter 3 Business Finance - Mrs. Stice

Balance Sheet & Net Worth • ______________called net worth statement • is a financial statement that list the items of value that you own, the debts that you owe, and your _____________ • _____________________ • difference between the amount that you own and the debts that you owe • a measure of your current financial position Chapter 3 Business Finance - Mrs. Stice

Steps to Net Worth 1. Determine Your ____________ 2. Determine your _____________ 3. Calculate your _____________ 4. ______________your financial situation Chapter 3 Business Finance - Mrs. Stice

Lets look at your own!In class! 1. Assets – did anyone have favorite toy or other item from your childhood? Valuable or not? Collectibles? Could we ask an appraiser, dealer, books, internet 2. Liabilities 3. Calculate your net worth 4. Evaluate your financial situation Chapter 3 Business Finance - Mrs. Stice

1st Step to net worth • 1. Determine your assets • Assets – items of value that you own, including cash, property, personal possessions, and investment • 4 kinds of wealth • ___________cash and items that can be quickly converted to cash. • _____________that is own and market value is listed • _______________-valuable items you own • _______________retirement accounts, securities like stocksand bonds Chapter 3 Business Finance - Mrs. Stice

2nd Step to net worth • 2. Determine Your Liabilities • Debts that you owe • _______________– short-term debts that have to be paid within a year or so • Medical bills, cash loans, taxes, insurance payments • ______________debts that don’t have to be fully repaid for at least a year • Car loans, student loans, mortgage loans • ______________as telephone expense doesn’t qualify as liability because it gets paid monthly Chapter 3 Business Finance - Mrs. Stice

3rd Step to net worth • 3. Calculate your _______________ • Use the formula • Assets – liabilities = net worth • You want more assets than liabilities • If you have more liabilities then you may experience insolvency because you can’t pay your debts. Chapter 3 Business Finance - Mrs. Stice

4th Step to net worth • 4. Evaluate Your Financial Situation • Look at your statements and use it as a guide • Is your net worth increasing? If so, keep it up! • Is your net worth decreasing? If so, then what changes do I need to do. • Reduce spending/debt • Increase income • Increase investments • Increase savings Chapter 3 Business Finance - Mrs. Stice

Lets look at your net worth again!! • What could you do different? Chapter 3 Business Finance - Mrs. Stice

Analyze someone’s else balance sheet! Analyze the assets, liabilities, and net worth. How is it similar and different from their own personal balance sheet? I will give you a balance sheet to look at! Chapter 3 Business Finance - Mrs. Stice

CASH FLOW STATEMENT STEPS Record your ____________ Record your ____________ Net cash flow Chapter 3 Business Finance - Mrs. Stice

Analyzing Your Financial Position From our Financial Statements Net cash flows so does your net worth Deficit by spending more-net worth declines Surplus by spending less-net worth increases Chapter 3 Business Finance - Mrs. Stice

Net worth will go up if you Increase savings Spend less Pay off debt Chapter 3 Business Finance - Mrs. Stice

Budgeting to Achieve Your Financial Goals Section 3.3 Chapter 3 Business Finance - Mrs. Stice

___________- a plan for using your money in a way that best meets your wants and needs. You can learn to live within your income. You can learn to spend wisely. Chapter 3 Business Finance - Mrs. Stice

Write a short story about yourself predicting where you will live in ten years. The story should include your job, lifestyle, and financial goals. Your story will be shared so please write neat, correct punctuation and spelling. Chapter 3 Business Finance - Mrs. Stice

Prepare a Financial Budget 6 steps Chapter 3 Business Finance - Mrs. Stice

1st Step Your financial goals • They are the purposes you want to accomplish with your money • So you need to plan your • ____________ • ____________ • ____________ Chapter 3 Business Finance - Mrs. Stice

2nd Estimating Your Income • List all possible ___________you will receive • Sometimes you may have to estimate • Don’t include money you won’t be getting. • Ex: If you get hourly wage and it stays consistent then use it. But don’t guess you might get more hours. Chapter 3 Business Finance - Mrs. Stice

3rd-Budget for the unexpected Expenses/Savings • Put aside money for _______________ • Six month’s of living expenses in case lose job, sickness, death, divorce • Emergencies for things go wrong such as washer/dryer breaks etc. • Helping a family member • Savings for _________________________ Chapter 3 Business Finance - Mrs. Stice

4th Budgeting for _____________ • These are ones that don’t change each month • Mortgage, car loan, student loan, insurance 5th Budgeting for _______________ • Those expenses that change from month to month • Medical, clothes, food, heating and cooling etc. Chapter 3 Business Finance - Mrs. Stice

6th – Recording What You Spend • Keep track of your spending and income • Several items in your budget are guesses. • Your budget won’t work out sometimes as planned. • The difference between spending amount and the budget amount is called _________________ • ____________if you spend less • __________________ if you spend more Chapter 3 Business Finance - Mrs. Stice

7th Reviewing Spending and Saving Patterns _____________ is a continual process Review each month May need to curtail spending or increase income Revise your goals or adjust your budget may be necessary. Chapter 3 Business Finance - Mrs. Stice

How to Budget Successfully • A budget is • 1. ______________ • 2. ______________ • 3. ______________ Chapter 3 Business Finance - Mrs. Stice

Why Increase Your Savings • It is the key to establishing a sound financial future. • The more you save, the better you will be able to handle unexpected emergencies and the sooner you will be able to meet your financial goals • Maybe retire early and be comfortable • Send your children to college Chapter 3 Business Finance - Mrs. Stice

Ways to Increase Your Savings • 1. Set aside a fixed amount as savings before you sit down to pay your bills • ___________________ • 2. __________________ • Some employers offer this option • 3. ______________ • Spend less • Go library – Chapter 3 Business Finance - Mrs. Stice

SAVESAVESAVE The _____________is more important than the method. The __________, the better. Small amounts can ____________than most people realize. Chapter 3 Business Finance - Mrs. Stice

Money Management Strategy