budgeting and finance
DESCRIPTION
Budgeting and Finance. Introduction to Business and Technology. Describe situations that may occur as a result of poor budgeting . Bell Ringer :. Be prepared to share your answers with the class. GPS Focus Standards. BCS-BE-26: The student explains the process in developing a budget . - PowerPoint PPT PresentationTRANSCRIPT
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Budgeting and Finance
Introduction to Business and Technology
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Describe situations that may occur as a result of
poor budgeting.
Bell Ringer:
Be prepared to share your answers with the class
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GPS Focus Standards• BCS-BE-26: The student explains the process in
developing a budget.
• BCS-BE-27: The student analyzes the financial statements of a business and utilizes those statements to make important business decisions.
• BCS-BE-28: The student identifies financial aspects associated with opening a business.
• BCS-BE-29: The student completes records which are fundamental for any business.
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Essentials Questions• How can a budget increase your profits?
• What documents do you need to make wise decisions concerning the financial health of your business?
• How much does it cost to open a business? from where do those numbers come?
• Why are your bank records and credit report so important?
• How do you maintain a good credit score?
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Budgeting TechniquesLesson Objectives: Identify the purpose of a budget
Describe steps for preparing a budget Describe characteristics of a successful budget
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BudgetA plan for managing income and expenses over a certain period of time.
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Purpose of Budgets Live within your income. Make wise buying decisions. Avoid credit problems. Plan for financial emergencies.
Develop money management
skills Achieve your financial goals.
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The Budget Process1. Set Financial goals -
What do you want to achieve?
2. Plan Budget Categories
3. Maintain financial records
4. Evaluate your budget
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1. Set Financial GOALS:
(Affect what we spend our $$ on!)
Short-Term Goals
Long-Term Goals
SMART Approach
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SMART ApproachS Specifi c Make the goals specific so you know
exactly what you want to achieve
M Measurable Make the goals measurable so that you know the specifi c amount to save
A Action-oriented
Make the goals action-oriented so that you know what actions you need to take
R Realistic Make the goals realistic based on your income
T Time-based Make the goals time-based so that you have a time f rame f or achieving them
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SMART Goal ExampleI will save $100/month for 18 months from my part-time job to purchase a car by July 31, 2014.
Specific-purchase a carMeasurable-$100/monthAction-oriented-I will saveRealistic-from my part-time jobTime-based-July 31, 2014
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2. Plan Budget Categories
Income Paycheck Allowance Scholarships Borrowed
Money Revenue
Expenses Needs Wants
Savings
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Two Types of Expenses
Fixed
Variable
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Fixed Expenses
RentMortgage payments Insurance premiums
Costs that occur on a regular basis and are the same amount each time
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Variable Expenses
Food ClothingUtilities i.e., telephone, electricity, water
Costs that differ each time and may not be as easy to estimate
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Personal Budget Categories
SavingsFood ClothingHousehold
TransportationHealth and personal careRecreation and EducationGifts and contributions
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AllowanceThe amount of money you plan to use for a certain budget category
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3. Maintain financial records
Record income and expensecheckbooks, bank statement
Prepare an income and expense summaryspreadsheets, budgeting software
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4. Evaluate Your Budget Budget variance - difference
between actual spending and budgeted amount
Deficit - Actual spending is greater than budgeted amount
Surplus - Actual spending is less than budgeted amount
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Characteristics of an Effective Budget
Realistic – reflect current income and planned spending Flexible – adaptable to unexpected expenses Regular evaluation – every few
months Well planned and clearly communicated – involve all family members Simple format – user friendly
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Review Questions
1. Which of the following is an example of a fixed cost?a.clothingb.accessoriesc.car paymentd.entertainment
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Review Questions
2. Which of the follow is an example of a variable cost?a.rentb.insurance premiumsc.water billd.mortgage payment
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Review Questions3. A major purpose of a budget is
to:a.assist with comparison
shoppingb.achieve financial goalsc. reduce a person’s enjoyment
of lifed. gather data for using credit
cards
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Review Questions 4.The most uncertain aspect of
the budgeting process involves:a.estimating variable expense b.determining net worthc.estimating fixed expensed. setting financial goals
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Review Questions 5.The following is a
characteristic of an effective budget:a.should be written in ink b.limited to one pagec.should not changed. should be evaluated
regularly