CHAPTER 6BUDGET – SAVING MONEY

BUDGETING A BUDGET is a plan for dividing income

among spending and saving options.

Most budgets are based on SHORT TERM and LONG TERM financial goals.

Do you have any short term or long term goals?Write a couple on the note lines next to the slide in

your notes.

SHORT TERM VS LONG TERM GOALS short term goals are things you hope to

achieve within a year, such as spending $200 to visit a friend who moved away.

Long term financial goals are always important parts of life-span plans.

Life span plans require more money than people can set aside from current income. To pay for goals such as college, a home, and

retirement you need savings.

TRACKING INCOME AND EXPENSES You should always have a way of tracking your

income and tracking your spending. Track income:

keep paychecks (usually your employer will keep an electronic record now)

Keep track of money received from Birthdays, Christmas

Keep track of your bank account – money in and money out

Track Spending: keep sales receiptsTrack credit card statementsTrack checking statement (either online banking or

check register)Establish a filing system – keep important purchase

receipts and written records of other purchases

FIXED AND FLEXIBLE EXPENSES Fixed Expenses: amounts of money you are

committed to spend. You have no choice. You must pay these expenses when they are due

Rent, phone bill, student loans, utility bill Do YOU have any fixed expenses right now as a teenager?

Write down 3 or 4 on the lines next to this slide.

Flexible expenses: amounts of money that you can choose to spend or not to spend. These are Wants, not Needs.

Designer clothes, going out to eat, newest electronic device Do YOU have any flexible expenses right now as a

teenager? Write down 3 or 4 on the lines next to this slide. Luxury goods – goods that have special qualities that make

them more expensive than the alternative Sports car, fur coat, Rolex watch

BUDGET WORKSHEET 5 steps in creating a Budget Worksheet

1. Create a worksheet Take a sheet of paper, and divide it into 4 columns.

1st column – list your sources of income and categories of spending and saving

2nd column – record the amounts you expect to receive, spend or save during the month

3rd column – record the amount you actually receive, spend or save

4th column – record the difference

I WILL NOW GO IN DEPTH WHAT YOU ARE TO PUT IN EACH COLUMN…

LOOK AT PAGE 202 IN YOUR BOOK FOR AN EXAMPLE

BUDGET WORKSHEET 2. Estimate your Income – column 1:

estimate uneven income – your income will not be the same every month

Be sure the income is real – try to think of every income, including uneven income flows

3. Estimate your Expenses and savings – column 2:

Plan for uneven expenses Like care insurance may be due in May and Nov.

Charitable Giving Predict the amount (if any) you donate to charity

Plan your saving – your saving account should have money that you planned on putting in, not just the amount left over after spending everything

BUDGET WORKSHEET4. Record your Actual Income – column 4

Here is where you are recording your actual income, expenses, and savings.

You should have most of your receipts or a written log of what you spend your money on during the month

5. Calculate the difference – column 5 Now this is where you subtract the differences

between your estimated expenses and your actual expenses

TAKE TIME TO COMPLETE YOUR BUDGET WORKSHEET RIGHT NOW IN PAIRS, THEN TURN IT IN.

USE THE EXAMPLE ON PAGE 202 AS A REFERENCE

BUDGET PITFALLSHere are some reasons some people fail

when making a budget:1. Some people get too specific, too much

detail makes it too hard to follow – keep it simple

2. Some people don’t predict the correct amount of their flexible expenses

3. Some people lump to many expenses under miscellaneous

4. Some people give up on budgets because they think it takes too much time and effort to maintain them.