Presentation on theme: "Budgets & Financial Records"— Presentation transcript:
1 Budgets & Financial Records Chapter 8Lesson 8.1 – Budgeting and Record KeepingLesson 8.2 – Legal Documents and Filing Systems
2 Importance of Financial Planning Financial planning begins with budgeting and good record keeping.A financial plan is an orderly program for spending, saving, and investing the money you earn.Disposable income is the money you have left to spend or save after taxes have been paid.
3 Financial planning helps you. . . Determine and evaluate your options for using your money.Make sure you use your limited funds for the things you want most.Prevent careless and wasteful spending.Organize your financial resources so that you can maintain a plan of personal financial fitness.Avoid money worries by planning your saving, spending, and borrowing to stay within your financial means.
4 BudgetingA budget is a spending and savings plan based on your expected income and expenses.Income must equal (or exceed) expensesBudgeting helps you plan your spending and saving so you won’t have to borrow money to meet your daily needs.
5 Steps in Preparing a Budget Estimate total expected incomePlan your budget for a specific period of time.Decide how much your want to saveExperts recommend saving 10% of disposable incomeEstimate your expensesBalance your budgetAdjust your plan to make sure it balances
6 A Typical Monthly Budget Example on page 210 in bookIncomeSavingsExpensesFixed expenses – costs you are obligated to pay at specific timesVariable expenses – costs that vary in amount and typePractice budget worksheet
7 Personal RecordsGood records make budgeting and long-range planning easierThese records are basis for income tax returns, credit applications, and other financial formsFour types of personal records you should keep:Income and expense recordsStatement of net worthPersonal property inventoryTax records
8 Records of Income and Expenses W-2 FormsBank statementsStatements from Investment CompaniesExpensesCharitable contributionsMedical billsWork-related expensesOther expense receipts
9 Statement of Net Worth Lists assets and liabilities Difference is your net worthIf your assets are greater than your liabilities, you are solventIf your assets are less than your liabilities, you are insolvent
10 Personal Property Inventory List of all valuable items you ownShould list their purchase price and approximate current valuesPersonal property includes:ClothingFurnitureAppliancesAnything of value inside of your homeImportant to safeguard the inventory
11 Tax Records Should keep copies of: Keep records for three years Tax returnsW-2 formsReceipts verifying income and expensesKeep records for three years
12 Legal Documents Contracts Credit Plans Mortgages Rental agreements A legally enforceable agreement between two or more parties to do or not to do somethingCredit PlansMortgagesRental agreements
13 Agreements Express agreements Written agreements Implied agreements Can be oral or written, terms have been agreed upon between the parties in wordsWritten agreementsImplied agreementsUnwritten agreement where you have agreed to something simply by doing it
14 Elements of Contract Agreement Consideration Contractual Capacity LegalityGenuine AssentLegal Form
15 Valid, Void and Voidable Contracts Contracts that contain all the essential elementsLegally enforceableMay become unenforceable if time limit for filing suit runs outVoidContracts that re missing one or more elementsNot enforceable in a court of lawVoidableContract that can legally be avoided by one of the partiesIf that party chooses avoidance, or disaffirms, it will not be enforced
16 Consumer Responsibilities Understand all clauses and terms contained in the agreement.Keep a copy of the agreement.Be sure the agreement is dated correctly.Be sure all blank spaces are filled in or marked out and that no changes have been made after you have signed it.Be sure all terms agreed upon are written clearly.Be sure all dates, amounts, and other numbers are correct and written clearly.Be sure proper disclosure is made by the seller.Be sure all cancellations and adjustments are made in accordance with the contract.
17 Negotiable Instruments An unconditional written promise to pay a specified sum of money upon demand of the holder.To be collectible it must:Be in writing and signed by the maker.Must contain an unconditional promise to pay a definite amount of money.Must be payable upon demand or on a fixed future date.Must be payable to the order of a particular person or the holder of the note.Must be delivered to the payee.
18 More on Negotiable Instruments Most common form – a checkAnother form – promissory noteMaker – the person who creates and signs the notePayee – the person to whom the note is made payableCo-signer – a person who promises to pay the note if the maker fails to pay
19 Warranties Also called a guarantee Statement about a product’s qualities or performance that the seller assures the buyer are true.May be in writing or assumedALL products contain implied warranties
20 Filing Systems for Personal Records Paper Filing SystemElectronic Record KeepingSpreadsheetsDatabases