1. Money Management
28.2

2. Objectives Discuss the importance of budgeting.
List the steps for preparing a budget.

3. The Main Idea
Meeting 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 of
Your expected income
Your expected expenses
Your 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 afford
Budgeting 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 Goals
Estimate Your Income
Budget for Unexpected Expenses and Savings
Budget for Fixed Expenses
Budget for Variable Expenses
Record What You Spend
Review 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 receive
Your gross pay is reduced by various deductions.
Deductions include:
Taxes
Insurance
Retirement contributions
Your 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 needs
Unexpected expenses include medical visits or accidents
Savings 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 regularly
Fixed Expenses include:
Rent
Insurance
Car loan

13. Step 5: Budget for Variable Expenses
Expenses that change and can be controlled more easily that fixed expenses
Variable expenses include:
Food
Phone charges
Entertainment
Gifts

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 spend
It 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. Assignment
Think 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