2 Objectives Discuss the importance of budgeting. List the steps for preparing a budget.
3 The Main IdeaMeeting your financial goals requires you to know your income and expenses. A budget can enable you to track your spending and make choices about your money.
4 The importance of budgeting Money management is necessary for consumers, businesses, and governments.A budget helps people set financial priorities.A budget is a recording ofYour expected incomeYour expected expensesYour planned savings
5 The Importance of Budgeting Consumers, businesses, and governments must figure out how to utilize their income.Most people want more goods and service than they can affordBudgeting helps you set priorities
6 Average Household Expenses If a family earns $3,000 a month, how much money would they likely spend on housing?
7 Preparing a Budget There are 7 steps in preparing a budget Set Your Financial GoalsEstimate Your IncomeBudget for Unexpected Expenses and SavingsBudget for Fixed ExpensesBudget for Variable ExpensesRecord What You SpendReview Spending and Saving Patterns
8 Step 1: Set Your Financial Goals As you prepare to set your financial goals, you should consider several questions.What do I want to accomplish in the next month, year, five years?What is important to me?Are my goals practical?You might find it helpful to separate your goals into short-term, intermediate, and long-term goals.
9 Step 2: Estimate Your Income Start your budget by recording your estimated income for the next month.Include all sources of income that you know you will receiveYour gross pay is reduced by various deductions.Deductions include:TaxesInsuranceRetirement contributionsYour take-home pay (after deductions) is called your net pay
10 Step 3: Budget for Unexpected expenses and savings You have to plan for expenses such as food, rent, and clothing to satisfy your basic needsUnexpected expenses include medical visits or accidentsSavings make it possible for you to meet future wants and needs
11 Step 3: Budget for Unexpected expenses and savings I WISH!!!In your budget, make sure that the total income figure is the same as the total for planned expenses and savings.If your planned expenses and savings are more than your income, you will have to cut expenses or find additional income
12 Step 4: Budget for Fixed Expenses Expenses that occur regularlyFixed Expenses include:RentInsuranceCar loan
13 Step 5: Budget for Variable Expenses Expenses that change and can be controlled more easily that fixed expensesVariable expenses include:FoodPhone chargesEntertainmentGifts
14 Step 6: Record what you spend Keeping track of your expenses will help you revise your budget if necessary.The budget variance is the difference between your budgeted amount and the actual amount you spendIt can be a surplus (extra money) or a deficit (not enough money)
15 Step 7: Review Spending and Saving Patterns You need to review your budget each month and consider making changes.
16 AssignmentThink about what your financial goals are. Do you want to go to college, buy a car or go on a school trip? Write a 300 word essay that explains how making a budget can help you reach you goals. How do you plan to save up enough money to reach your goals?
17 Assignment Complete Worksheet Packet for 28.2 Complete questions 2-14 on page 508/509