1. Budgeting Chapter 7, page93

2. What is a budget? A Spending and Savings plan based on − Estimation of expenses & income − Recording of expenses & income Tool to reach goals

3. What are some of your financial goals? Buy a car Go to college Get an apartment Retire at some point Vacation

4. Page 95 Money is active You must do a written cash flow plan every month – known as a budget Keep your checkbook balanced Overdrafts area sign of crisis living, and sloppy, lazy money habits Use duplicate checks if necessary The ATM card & Debit card are budget busters

5. Page 95 Continued Hate ‘budget’ for 4 reasons 1.It has a straight jacket connotation 2.It has been used to abuse them 3.They’ve never had a budget that worked 4.Paralysis from fear of what they will findParalysis from fear of what they will find

6. Page 96 Cash flow plans do not work when you: 1.Leave things out 2.Overcomplicate your plan 3.Don’t actually do it 4.Don’t actually live on it “Management by crisis” Managed money goes farther Written plan will remove many of the money fights.

7. Page 96 contined Cash flow plans do not work when you: 1.Leave things out 2.Overcomplicate your plan 3.Don’t actually do it 4.Don’t actually live on it “Management by crisis” Managed money goes farther Budget will remove many of the money fights from your marriage

8. Page 96 Continued Budgets will remove much of the guilt, shame and fear. Budgets will remove many of the overdrafts from your life, consequently removing a lot of stress Budget will show if you are overspending Easiest and most powerful plan is a zero-based plan, using the envelope system

9. Steps to Budget #1 Estimate Income − Gross Income: Earn before taxes − Net Income: Take home pay How to look at a paycheck?

10. Paycheck Hourly Rate Other Pay Hours GROSS PAY DEDUCTIONS Federal Income Social Security Medicare State Income (4.35%) City Income O THERS NET PAY

11. Steps to a Budget #2 Estimate Expenses − Fixed: Due certain dates and fixed amounts − Flexible / Variable: Different amounts and / or you control when you pay Have to pay utilities on a due date = fixed but can somewhat control cost = flexible Which is it?

12. Steps to Budget #3 & #4 3. Planning for savings / goals − Saving is an expense, must do − Easiest to save with payroll deductions − Goals are either short or long term 4. Develop a trial budget – Every $ − Look at values and how you spend − Estimate how much is spent per month, spread cost of big items over the year Vacation does not all get paid in July – budget $50 a month Look at what experts say should be spent

13. Steps to Budget #5 Adjust your budget − Over month keep record of actual spending − Alter budget to be realistic

14. Common Mistakes NOT planning for occasional expenses NOT being realistic in estimating expenses − Do NOT set unrealistic goals NOT being specific enough in setting up budget categories

15. People Can Help Accountant Stockbrokers Lawyers Bankers Consumer Education / Educators

16. Try it together Julie works 15 hours a week making $8 an hour Julie has: − Cell phone bill of $20 − Car insurance payment of $60 − Lunch of 2.75 a day at school − Likes to go out − Wants to visit grandma at the end of summer, will cost $200 for the trip

17. Try It When done, complete Personal Budget − Look at what you spent the past two weeks & extrapolate for the year − Create a monthly budget you could follow Page 115