1. Budgets & Financial Records
Chapter 8
Lesson 8.1 – Budgeting and Record Keeping
Lesson 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. Budgeting
A budget is a spending and savings plan based on your expected income and expenses.
Income must equal (or exceed) expenses
Budgeting 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 income
Plan your budget for a specific period of time.
Decide how much your want to save
Experts recommend saving 10% of disposable income
Estimate your expenses
Balance your budget
Adjust your plan to make sure it balances

6. A Typical Monthly Budget
Example on page 210 in book
Income
Savings
Expenses
Fixed expenses – costs you are obligated to pay at specific times
Variable expenses – costs that vary in amount and type
Practice budget worksheet

7. Personal Records
Good records make budgeting and long-range planning easier
These records are basis for income tax returns, credit applications, and other financial forms
Four types of personal records you should keep:
Income and expense records
Statement of net worth
Personal property inventory
Tax records

8. Records of Income and Expenses
W-2 Forms
Bank statements
Statements from Investment Companies
Expenses
Charitable contributions
Medical bills
Work-related expenses
Other expense receipts

9. Statement of Net Worth Lists assets and liabilities
Difference is your net worth
If your assets are greater than your liabilities, you are solvent
If your assets are less than your liabilities, you are insolvent

10. Personal Property Inventory
List of all valuable items you own
Should list their purchase price and approximate current values
Personal property includes:
Clothing
Furniture
Appliances
Anything of value inside of your home
Important to safeguard the inventory

11. Tax Records Should keep copies of: Keep records for three years
Tax returns
W-2 forms
Receipts verifying income and expenses
Keep 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 something
Credit Plans
Mortgages
Rental agreements

13. Agreements Express agreements Written agreements Implied agreements
Can be oral or written, terms have been agreed upon between the parties in words
Written agreements
Implied agreements
Unwritten agreement where you have agreed to something simply by doing it

14. Elements of Contract Agreement Consideration Contractual Capacity
Legality
Genuine Assent
Legal Form

15. Valid, Void and Voidable Contracts
Contracts that contain all the essential elements
Legally enforceable
May become unenforceable if time limit for filing suit runs out
Void
Contracts that re missing one or more elements
Not enforceable in a court of law
Voidable
Contract that can legally be avoided by one of the parties
If 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 check
Another form – promissory note
Maker – the person who creates and signs the note
Payee – the person to whom the note is made payable
Co-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 assumed
ALL products contain implied warranties

20. Filing Systems for Personal Records
Paper Filing System
Electronic Record Keeping
Spreadsheets
Databases