BudgetingAdult Living

What is a budget?

• A budget is a plan for spending and saving your money

• A budget includes: – Income- the amount of $ you earn or receive – Expenses- debts, obligations, or payments to

others– Savings- money set aside for future (short and

long term) needs

Why Budget?

• To keep track of expenses. (I just got paid…where did all my $ go?)

• To try to “live within your means”• To have an adequate savings plan for

emergencies and future financial needs

Income

• Each month you will receive money earned at the job that you have.

• Income is listed as:– Gross income- the amount you make before taxes

and other deductions are taken out– Net income- the amount you actually “take home”

*For budgeting purposes you should use the net income to create a monthly budget.

Taxes

• Before beginning a job, you will fill out a W4 form that will be sent to the federal (US) government to have taxes taken out of your paycheck. This money is used to fund national programs that benefit all Americans.

• A state tax form will also be filled out to have state taxes taken out of your pay. The state collects less tax than the US government and is used to fund local and state programs.

Withholdings

• You may have money withheld at the state and the federal level for paying taxes at the end of the year.

• Advantages: the money is taken out pre-tax and is safely held by the government

• Disadvantages: there is no way to get to your money if it is needed and tax is taken out in the event of over-collection

Other deductions

• Social Security and Medicare- Both are federal government programs that collect money from American workers to help other Americans. Social Security is used to aid elderly and others incapiable of earning money. Medicare helps provide health care to elderly and others who are unable to work to pay for health care.

Expenses

Fixed ExpensesAre usually the same from

month to month, are hard to “cut” from the

budget.Examples:

Rent, car payment, insurance payment,

cable bill, internet bill

Variable ExpensesTend to fluctuate from

month to month or don’t occur each

month.Examples:

Clothing, gifts, utilities that are calculated on use (electricity, gas), gasoline, donations

Average Expenses of Americans Under Age 25

• Average income: $29,057• Average annual expendatures: $28,181• Average number of people living in

residence:2• 80% of people under 25 are “renters”• 70% of people under 25 own or lease a vehicle

Annual Spending Averages of Americans Under Age 25

Series 1

Food $2348

Utilites $1781

Rent $4315

Household supplies $295

Clothing $1464

Transportation $5667

Personal Care $348

Gifts $393