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Money Management - 101 Practical Money Skills for Life What a Spending Plan will do for You Allow you to learn how finances work in your life Enable you to make good decisions about how you use money Make you aware of where your money is going Give you a way to save for specific items

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money management 101

Money Management - 101

Practical Money Skills for Life

what a spending plan will do for you
What a Spending Plan will do for You
  • Allow you to learn how finances work in your life
  • Enable you to make good decisions about how you use money
  • Make you aware of where your money is going
  • Give you a way to save for specific items
  • Help you to live within your income- or decide if you need to increase it
a spending plan will
A Spending Plan will
  • Show you where to cut spending
  • Provide methods for keeping good records of spending
  • Allow you to spend money without feeling guilty
  • Create a way to measure your progress
  • Improve communication with other people
step 1 assess needs
Step 1: Assess Needs

Make a realistic list of needs and wants

NeedsWants

Food Lots of Money

Clothing Cell Phone

Housing VCR or Big TV

Transportation New Car

Child Care Designer Jeans

Insurance Vacations

Medicines Boat

Titan Tickets

step 2 set goals
Step 2: Set Goals

Make sure your goals are SMART…

Specific- Clearly state what you want to do

Measurable- Measure by time and/or money needed

Attainable- Make sure your goal is realistic and possible

Relevant- Make sure goals fit your needs

Time related- Set a definite target day (day/month/ year)

step 3 make a plan
Step 3: Make a Plan

Put things in Priority Order- Imagine the actions you need to take to get from where you are now to where you want to be.

Goals are dreams with deadlines! Post your goals where you will see them frequently. Find a picture to represent your goals. Make them happen.

slide7

SMART GOAL

GOAL: Use cash to purchase a refrigerator in 6 months. New refrigerator will cost $600.00.

MUST SAVE FROM EACH PAYCHECK:

$100/Paycheck - if paid monthly

$50/Paycheck - if paid bi-weekly or semi-monthly

$25/Paycheck - if paid weekly

slide8

Your Planwith Actions

  • I will save $25.00 from each weekly paycheck for refrigerator.
  • Steps to Get There:
  • Pack lunches.
  • Borrow movies and CD’s from the library.
  • Shop with a list for everything.
  • Stay out of Walmart!

TARGET DATE: 6 MONTHS

slide9

PRIORITIZINGGOALS

  • Build an emergency savings of $_____________.
    • Put $50.00 from each paycheck for 5 months.
    • Use OVERTIME or BONUS $$ to build more quickly.
  • Build a retirement account.
    • Put $50.00 (automatic deduction)
  • 401(k)
  • Roth IRA
two parts of money management
The money that comes in - INCOME

Regular take home income

The money that goes out – SPENDING

Must know what you are spending to develop a plan for managing your money.

Three type of expenses

Two Parts of Money Management
making your money
Making your Money

How much money comes in each month?

Income has two parts:

  • Gross income- total you actually earn
  • Net income (take home pay) - what is left over after your employer takes out deductions for taxes, Social Security, Medicare, and other needs.
three types of expenses
Three Types of Expenses
  • Fixed expenses
  • Flexible (variable or controllable) expenses
  • Periodic or occasional expenses
slide13

FIXED / MONTHLY EXPENSES

  • Car Payments
  • Rent or Mortgage
  • Child Care
  • Cable TV
  • Car Insurance
slide14

FLEXIBLE / VARIABLE EXPENSES

  • Clothing
  • Food
  • at home
  • away from home
  • Telephone
  • Utilities
  • Gasoline
slide15

FLEXIBLE / VARIABLE EXPENSES (cont)..

  • Public Transportation
  • Medical / Dental
  • Recreation
  • Supplies
  • household
  • personal
slide16

OCCASIONAL / SEASONAL EXPENSES

$500

$100

$600

$800

$0

$200

$0

$200

Car Maintenance / Repairs

License Tags

Insurance Payments

Gifts / Holidays

School

Taxes

Magazine Subscriptions

Vacations

$2400 / 12 = $200/month

tracking your money
Tracking your money

Keep and organize the following items to help you keep up with expenses

  • Check registers
  • Check stubs and canceled checks
  • Receipts
  • Bills and invoices
  • Credit card statements
  • Calendars, diaries, pocket notebooks
trimming expenses
Trimming Expenses
  • Pack lunch for work or school
  • Shop for store or generic brands
  • Use the public library
  • Choose free recreational activities
  • Check resale shops or garage sales for bargains
  • Eat out less often
  • Handle home maintenance and repairs yourself
  • Use public transportation when possible
  • Take advantage of free activities
savings

SAVINGS

It’s never impossible to save money, no matter how small the amount.

saving your money
Saving Your Money

Two types of savings accounts…

1)Emergency fund – provides means for paying for emergencies instead of using credit

2) Nest egg account- helps you reach specific goals such as buying a house or taking a vacation

start the savings habit now
Start the Savings Habit Now!
  • If you save $20 per week, every week for a year, after one year you will have saved $1,040!
  • Keep this up and after five years you will save $5,200, not to mention the interest you will earn!
slide22

WAYS TO SAVE

Work average 22 days/month

Lunch $8.00/day $176/month

Coffee $1.00/day $22/month

Soft Drinks $1.00/day $22/month

Child’s Lunch $2.00/day $44/month

Total $264/month

remember these tips
Remember these tips…
  • Don’t shop on payday
  • Don’t shop when you’re tired
  • Don’t shop for food when you’re hungry
  • Take your time. Try not to shop when you have to hurry
  • You don’t have to buy it today
  • Remember, nothing is a bargain unless you need it
  • Have a spending plan and stick to it
  • No one can make you buy anything
how much debt is too much
How much debt is too much?

Rule of thumb for consumer debt

Under 15%=comfortable 15-20%=Caution

Over 20%=Danger!!!

To figure your debt-to-income ratio:

Total average monthly debt payments

(excluding mortgage/rent and utilities) $400

Monthly take-home pay $2,000

$400 ÷ $2,000 = .20 = 20%

managing your money
Managing your Money

Developing a Personal Spending Plan will show you…

  • What money is coming in
  • How much you spend on the basic needs, fixed and variable
  • How much you need to set aside for periodic or unexpected expenses
  • How to plan for savings and investing
  • What is left over for your wants
money management 101 get the most from your money

Money Management - 101Get the most from your Money

Set Goals

Develop a Plan

Balance Spending and Saving