1. Managing Your Money
Chapter 23

2. Your Income
21:1

3. Income from Work
Hourly Wage- there is a minimum wage which is set by the federal government
Salary – a set amount of money that is paid for all the work that goes with a job description
Commission – in a sales job, commission is often a percentage of each sale made by a work
Profit- some people are self employed and earn an income through their own business

4. Income from Work
Gross income – the wage or salary you make before taxes are taken out
Net income – the amount of money left after subtracting the deductions from your gross income
Example: federal and state income tax, Social Security (FICA – Federal Insurance Contributions Acts), Insurance, Retirement Program

5. Savings
Money placed in a saving account earns interest. Interest is a charge for the use of money
Income earned on a saving account is call interest income
Interest income on a savings account is based on:
Total saving
Length of saving
Interest rate
Type of Compounding used
By adding to the principal it will help build your savings

6. Saving
Compounding is when the interest previously earned is added to the total before new interest earnings are figured
Interest may be compounded annually, semi-annually, quarterly or monthly

7. Investments
Investments include stock, bonds, mutual funds, retirement accounts and real estate
Trading – buying and selling stocks; only recommended for experts

8. Income During Emergencies
Financial experts recommend having enough savings set aside to cover living expenses for three to six months in the event of an emergency. Establishing such an account and contributing to it regularly can help you avoid financial problems

9. Using a Budget
23:2

10. Budget A budget is a plan for the use of your income
A budget will help you
Control spending so you live within your income
Guide decision making about purchases
Set aside money for special purchases, future plans, and emergencies
Reach financial goals

11. Establishing Goals for Your Income
1st step in a budget is your needs and wants
Your needs and wants will determine your short and long term financial goals
Short terms goals examples are buying a car or taking a vacation
Long-term is college education or retirement

12. Estimating Income
Based on your net income and include any other sources of income

13. Planning Expenses
Fixed expenses are expenses that are constant each month. Fixed expenses include car payment, monthly insurance payment and mortgage or rent payment
Variable expenses are expenses that change or vary from month to month. Example: phone bill, food, clothing cost

14. Planning for Saving
Treat your savings as a fixed expense

15. Making a Budget Work for You
Making Buying Decisions
Being Realistic and Flexible
Using a Computer for Budgeting – spreadsheets or accounting software

16. Banking Services
23:3

17. You should always choose a financial institution that is insured
You should always choose a financial institution that is insured. The Federal Deposit Insurance Corporation (FDIC) insures most banks.

18. Checking Accounts
A personal checking account is safe place to keep your money. It also offers a convenient way to pay bills and make purchases

19. Using Checks

20. Using Debit Cards and ATMs
A debit card is used to immediately withdraw funds from your checking account to pay bills or make purchases

21. Managing Your Account You should always keep accurate records
Overdraft occurs when you write a check, use your debit cared or withdraw cash form an ATM for more money than you have in your account
Some financial institutions offer overdraft protection, which acts as an instant loan to cover overdraft to a certain limit. Usually, the bank will charge a fee for this service.

22. Online Banking
You can monitor you account activity 24 hours a day. You can access your statement, check your account balance, review deposits and withdrawals, and transfer funds
Electronic funds transfer (EFT) allows you to use a computer to move money between your accounts

23. Savings Accounts
Convenience – Some savings accounts allow you to withdraw money when you want
Interest rate – The higher the interest rate, the more interest income you will earn
Liquidity – The ability to take our your money on short notice is liquidity

24. Types of Savings Plans Regular saving account Club account
Certificate of deposit (CD)
Money market deposit account

25. Using Credit Wisely
23:4

26. Main benefits of credit
You can goods and services before paying for them
In emergencies, credit lets people purchase needed goods or services
Credit is convenient
Using credit can be safer than carrying large amounts of cash

27. Disadvantages of using credit
Using credit can encourage overspending
Using credit cost money
Credit reduces future income
Misusing credit can cause serious financial problems

28. Tips for Using Credit Cards Wisely
Pay your bill in full each month and avoid interest charges
Pay you bills on time to build your credit rating
Paying your loans off before they are due

29. Loans
Loans are type of credit often used to finance cars, homes, education or a new business
Loans are considered installment credit, which means the loan is paid back equal installments, usually as monthly payments
Collateral is form of security on a loan

30. The Cost of Credit
The Truth in Lending Act requires lenders to disclose the exact cost of using credit, including interest and other charges, such as annual fees.
Lenders also are required to disclose the annual percentage rate (APR), which is the annual cost of credit. They must also disclose the total interest the consumer will pay
Experts recommend keeping credit expenses under 20% of net income

31. Applying for Credit
Your credit rating is a record of how well you paid your bills in the past
To keep a good credit rating, you need to pay bills on time

32. Credit Cards