budgeting and cash flow management. objectives describe the relationship between financial planning...
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Budgeting and Cash Flow Management
Objectives
• Describe the relationship between financial planning and budgeting.
• Understand how to set and achieve long-and short-term financial goals.
• Establish the structural and mechanical aspects appropriate for your personal budget.
Objectives
• Resolve conflicting financial needs and wants.
• Describe the key aspects of the implementation phase of budgeting.
• Illustrate the methods and techniques to keep income and expenditures within planned budget totals.
Objectives
• Perform the tasks of the evaluation phase of budgeting.
• Explain the techniques of talking effectively about money.
Budgeting and Cash-Flow Management
IF YOU FAIL TO PLAN,
YOU PLAN TO FAIL!
To succeed in money matters requires implementation of financial plans.
Financial Planning and Budgeting
• Financial planning
• Budgeting
• Values
• Goals
Comparison of Statements
PAST
Income and Expense
Statement (Cash Flow Statement)
PRESENT
Balance Sheet
FUTURE
Budget
Six Phases of Budgeting
Set Goals
Organize
Decide
Implement
Control
Evaluate
Achieve success in financial goals
Monitor, review, revise
after each period.
• Setting long-term goals—anything more than 12 months away.
• Developing short-term goals from long-term goals
• Prioritizing goals
• Making goals time and dollar specific
Financial Goal-Setting Phase of Budgeting
• Select recordkeeping format
• Use cash or accrual basis
• Select budget classifications
• Select time periods
Organization Phase of Budgeting
• Inflation and other economic factors
• Realistic budget estimates
• Reconciling initial estimates
Decision-Making Phase of Budgeting
Implementation Phase of Budgeting
• Recording actual income/expenditures
• Managing with a cash-flow calendar
• Utilizing a revolving savings fund
• Calculating time-period totals
Control Phase of Budgeting
• Stay on target
• Check progress
• Be alert to problems or errors
REASONS FOR BUDGET CONTROLS:
Control Phase of Budgeting
• Use a checking account
• Employ a credit control sheet
• Check accuracy
• Monitor unexpended balances
BUDGET CONTROL MEASURES:
Control Phase of Budgeting
• Justify exceptions
• Use the envelope system
• Employ subordinate budget
BUDGET CONTROL MEASURES:
Evaluation Phase of Budgeting
• Compare estimated and actual amounts
• Decide how to handle balances
• Assess progress toward goals
Discussions About Money
• Unilateral
• Shared
• Divided
MONEY MANAGEMENT AND FINANCIAL DECISION MAKING FOR COUPLES:
Discussions About Money
• More income/more expenses
• Reliance on “second” income
• Discretionary account for each individual
COMPLICATIONS FOR DUAL-EARNER HOUSEHOLDS:
Discussions About Money
• Child support
• Alimony
• His/Her/Our children
• His/Her funds
COMPLICATIONS BROUGHT BY REMARRIAGE:
• Freedom
• Trust
• Self-esteem
• Guilt
• Indifference
• Envy
• Security/Comfort
• Power/Control
Discussions About Money
EMOTIONS AND MONEY:
• Get to know yourself and partner
• Learn to manage disagreements
• Use “I” not “you” statements
• Focus on commonalties
• Be honest
Talking About Financial Matters
Develop MoneySense in Children
• Give access to money
• Give freedom to save and spend
• Teach responsibility
• Allow freedom to fail
• Talk about family finances
Your PersonalSpending Style
• Givers
• Me-spenders
• Big-spenders
• Tightwads
• Normal People
Couples Should DiscussPersonal Finances
• Child bearing
• Employment
• Food and clothing
• Housing and transportation
• Recreation and vacations
• Future security and debt