1. What is a Budget? Welcome to class! Put phones away, take out your notes and answer this question: –WHAT IS A BUDGET? In answering this question, did you feel a bit like this? https://www.youtube.com/watch?v=mmT5 NM3PRdkhttps://www.youtube.com/watch?v=mmT5 NM3PRdk

2. The Students Will: –Define budget and economic terms that accompany budgets. –List budget categories and suggested percentages Agenda –Dream Budget Activity –PPT with notes –Realistic Budget activity

3. What is a Budget? Watch this clip and take notes on what a budget is. https://www.youtube.com/watch?v=z3lydP M2Xzwhttps://www.youtube.com/watch?v=z3lydP M2Xzw

4. What is a Budget? A plan for spending and saving money Most people think budgets are: –Rigid and inflexible –Painful – who wants to eat Top Ramen every night! –No fun! “A budget takes the fun out of money “ Mason Cooley

5. Why Budgets Make Sense Budgets help you: –Set priorities –Achieve what’s important to you A good budget is: –Realistic –Ongoing –Clear and easy to use

6. Budget Categories Income –Gross –Net Savings –Emergencies –Long-Term –Retirement –Short-Term Expenses –Fixed –Variable –Discretionary

7. Income: Money Earned Gross income: An individual’s income before taxes. Net income: Income after taxes are paid. Taxes can range from 15% to 31%.

8. Sample Pay Stub

9. Taxes and Deductions First job pays $30,000/year. Your salary is your gross income. Take off at least 25% for taxes and other deductions. That’s what’s left for you to spend. Example: Gross salary = $30,000 Minus 25% taxes and deductions- 7,500 Net income $22,500

10. Savings: Pay Yourself First Savings: unspent income Types –Emergencies: Plan to set aside three months’ living expenses –Long-term: Large ticket items (house, car, college) –Retirement: It’s never to early to start –Short-term: Vacation, clothes, new skis

11. Personal Savings Rate Declining 1974 to 1984 –10% 1985-1994 –Fell to 4.8% 2004 –1.8% 2005 –-0.5% 2006 –-0.7% Hasn’t been negative since the Great Depression What are social affects of no one saving?

12. Start Saving Young! Save $2,000 per year from age 19 – 26 –$1,035,148 by age 65 Save $2,000 per year from age 27 – 65 –$805,185 by age 65 Time value of money –Invest fewer dollars at a younger age but have 25% more

13. Expenses Expense: A cost to meet a need or pay a debt Types of expenses –Fixed –Variable –Discretionary

14. Needs vs. Wants Needs are essentials –Food –Shelter –Clothing –Transportation Wants are extras –Eating out –Big, expensive house –Shop till you drop –Brand-new or expensive car

15. Fixed Expenses A cost that occurs regularly and doesn’t vary in amount –Rent –Mortgage –Car payment –Insurance premium –School loans –Others?

16. Variable Expenses A cost that occurs regularly but may vary in amount: –Electricity –Water and Garbage –Telephone –Gasoline –Groceries –Others?

17. Discretionary Expenses A cost determined by personal wants that may be controlled –Movies, videos, CDs –Sports –Eating out –Grooming and clothes –Concerts and plays –Vacations –Others?

18. Budget Summary Establish a budget: –Income –Savings –Expenses Fixed Variable Discretionary End up with a budget surplus and you’re a success!