Budgeting 101

1. Budgeting 101 Many Americans do not know how to manage their money to keep themselves out of debt, let alone to save money. Budgeting can help!

2. Purpose Budgeting is important so you know what you make and how much you spend. If you find that you are spending more than you earn you are in big financial trouble! But if you have extra money, then you need to decide what to do with it: save or invest?

3. 50/30/20 Most financial advisors will tell you to follow a 50/30/20 rule: -50% to NEEDS (housing, food, utilities, transportation) -30% to Wants (Clothing, fun, entertainment, eating out, etc) -20% to Savings (Retirement, savings, investment) By following this guideline you can ensure you have money put away for Just in case. But here is the key… The 50/30/20 is on AFTER tax comes out of your check!! Do the math: on a $2600 a month Gross income, what are your net earnings at a 30% tax rate? Gross: $2600.00 Net: $1820.00

4. Budgeting methods There are a number of different budgeting methods people use to save money, pay their bills and make sure they have covered everything. To use this method, consumers will cash their check then put it into several different envelopes. Once the envelopes are full, they are used and that’s it. This is important for the “fun” envelopes.

5. Paying Debt Unfortunately many people get themselves into debt and need to pay back their debts. The envelope system can be a good start, but if you are in debt you have to decide how to pay it back using either the interest first method or the low to high method. The interest first approach is more logical and saves you money, but for most Americans it is the Snowball method that actually gets them to pay off ALL their debts! https://www.youtube.com/watch?v=GURdOhWSbOM-- Dave Ramsey

6. Other Budgeting Methods While the envelope method is popular among many people, they don’t like always needing or having Cash for all their bills. Technology has made this easier by inventing a number of different apps and websites.

7. Calendar However, the first step in EVERY budget decision is to figure out how much you make and spend. Then you can make adjustments to get yourself on track. I recommend creating and maintaining a calendar to track your expenses and when debts are due. At the end of each day write what you have spent money on, label when bills are due and how much, and when you get paid.

8. Budgeting project To help you figure out your expenses I have created a budgeting narrative for you. You will need to keep a checking register to keep track of your income and expenses.

9. Why are checks important for individuals?

10. Check Writing Remember that checks are ways to transfer money from your checking account to another person or a business. You must be careful when writing checks because they give people access to your money. The benefit to checks, however, is that you do not need to send cash. You can also post-date checks, meaning they cannot be cashed until the date on the check. Many people forgo using checks these days in favor of using credit and debit cards. However, it is important to have the skill to write and read a check.

11. How do Checks work? Unfortunately, America’s Check clearing system is woefully outdated. This causes hardships for millions of working families who need their money NOW.

13. A completed check would look like this. Always represent change as a 2-digit number over 100. In other words, how many pennies out of 100. (11.32 eleven dollars and 32/100) **Always include the account number for payments on items such as loans, mortgages, and utilities**

14. Don’t forget to fill out the register! You must keep track of expenses and deposits into your checking account. The best way to do this is with a checkbook register. Make sure you log each of the transactions into the register. Money going OUT of the account is a withdrawal Keep a running total in the last column When writing a check we put the check number here Money going IN to the account is a deposit