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