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Creating and Balancing a Budget

Creating and Balancing a Budget. What is a Budget and Why Have One?. What?. Why?. A Balanced Budget. A balanced budget is … Allocating and spending only money that you have Essential to financial stability Essential to financial responsibility

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Creating and Balancing a Budget

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  1. Creating and Balancing a Budget

  2. What is a Budget and Why Have One? What? Why?

  3. A Balanced Budget • A balanced budget is… • Allocating and spending only money that you have • Essential to financial stability • Essential to financial responsibility • The best way to stay out of unnecessary / unexpected debt

  4. Debt • Debt is a deficit that a person acquires when they have spent more money than what they have and they owe that spent money to a person or financial institution

  5. Good Debt vs. Bad Debt • Something that you NEED but can’t afford without tapping out your resources • A loan for something that meets the criteria above where you can afford the monthly payments • House • Education (Usually) • Borrowing for something you don’t necessarily need and can’t afford right now • A loan for something you need but can’t afford the monthly payments • Credit Card debt is defined as the worst debt

  6. The Art of Building a Budget • Step 1: • Identify your monthly income to assess how much you’re working with and establish a bottom line

  7. The Art of Building a Budget • Step 2: • Make a list of essentials in your life that you need to keep track of in regards to your spending • Rent, car payments, insurance, food, cell phone, credit card, student loans, leisure, SAVINGS

  8. The Art of Building a Budget • Step 3: • Budgets should consist of percentages when figuring out what exactly you can afford in those defined areas • Ex. • Housing at or <50% • Car at or <20% • Be careful not to max out in all areas of your budget • If you’re spending at the 50% for your housing you probably shouldn’t be a 20% for you car • Once you’ve defined the %s, see if what you’re spending is actually exceeding what you should be spending

  9. The Art of Building a Budget • Step 4: • Identify where your $$ has to go first and how much • Payments towards debt you owe need to have priority over shopping / weekend funds as those line items cannot be played with

  10. The Art of Building a Budget • Step 5: • Allocate your remaining funds where you’d be most happy with • Keep in mind… • The best payment you can make is a payment to yourself. Be sure you add to your savings account • When you think a financial road block can’t happen it will… be prepared!

  11. A Balanced Budget Is One Where… • All of your money is accounted for down to the penny • Your total expenses, which includes savings, totals the exact amount of money you’re receiving over the course of the month • You’re not counting on income that is not guaranteed like bonuses, tips, tax returns

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