Module 1: Introduction to Money Management Financial Literacy Money Trek Project Module 1: Introduction to Money Management

Money Management Manage your money Make informed financial decisions Reach your financial goals Provide tools for Budgeting

Objectives Track daily spending habits Prepare a personal spending plan or budget to estimate monthly income and expenses Identify ways to decrease spending and increase income Identify budgeting tools that will help you manage your money Right now, your money habits may not seem like a big deal. But habits can stick to you like glue. Good habits help you have self control as you plan to achieve your goals. Bad habits may push you out of the driver’s seat and lead you somewhere you really don’t want to go. The closer you get to being out on your own, the more you need to be in control of your actions.

Women, Money & Consequences Typically… Women earn less than men. Women are caretakers. Women are conservative investors. Women outlive men.

What about Choices? Men and women tend to choose different majors in college and to work in different occupations after college. Women tend to work fewer hours, even when they work full time. Women are more likely to leave the workforce or to work part time when they have young children. Choices can account for some of the differences in salaries, but they aren’t the whole story. Do you know where your money goes every month? Many people don’t know how much money they leak each month. How do you stop the leaks? - Keep a personal spending diary. A spending plan is: A step-by-step guide for meeting expenses in a given period of time

Money Management Budget Plan for spending and saving money

Financial Goals Be realistic Be specific Have a timeframe State the action to be taken Have milestones Specific Pinpoints something you want to achieve Measurable You can quantify how close you are to reaching the goal Attainable Within your resources/time frame Relevant Rewarding & important to your life Time-bound Trackable using milestones and schedules Specific: I plan to save $10,000 for a down payment on a condo. (this is specific, but is it attainable for a college studeny). Attainable: I plan to save $3,000 to rent my own apartment. (This is specific and more attainable). Measureable: I’ll know how I’m doing because I’ll set up a separate savings account for this goal and I’ll know that I’m on track when I see that it is growing by $250/month. Relevant: It is important to me to have a private place to live. Timebound: I want to save $3,000 for an apartment of my own by the time I graduate. By June of my junior year, I will have saved $1500. By June of my senior year, I will have saved $3,000. Think about where the money for tuition, books, room & board will come from.

Values What is the difference between a “need” and a “want”? Do you know where you money goes each month? To control your money: Understand where your money goes Keep a personal spending diary Good place to discuss and record (on board or flip chart, etc.) needs and wants. Needs are expenses that are absolutely necessary. Wants are optional. Some items are both a need and a want. For example, you need to eat, but you could pack a lunch instead of paying to eat out every day.

What is a Budget? An important step to financial security. About choices – choosing how to make and spend money. Knowing what your monthly income and expenses are. A budget is an important step to financial security. A budget is not punishment! A budget is about making choices, about choosing how to earn & spend money & save for the future. A budget plans for weekly, monthly and annual expenses, such as: Weekly: food, transportation, entertainment, others? Monthly: rent, utilities, car payments, others? Annual/semi-annual: tuition, vacation, others? A budget should address unexpected expenses, good and bad, such as: An unexpected invitation to the movies or something else fun A fender-bender Others?

Determine Income and Expenses Income–money that comes to you from: Jobs Allowances Interest and dividends Other sources Expenses–items you spend money on: Bills Transportation expenses Entertainment

Prepare a Spending Plan Keep track of your daily spending Determine your monthly income Determine your monthly expenses Find ways to decrease spending Find ways to increase income Do you know where your money goes every month? Many people don’t know how much money they leak each month. How do you stop the leaks? - Keep a personal spending diary. A spending plan is: A step-by-step guide for meeting expenses in a given period of time

Activity 1: Spending Diary Write down what you spend: Typical day Typical month At the end of the month Fixed expenses Flexible expenses Write down what you spend in a typical day. Keep track of everything you spend for one month. At the end of the month, sort spending into categories (rent, food, clothing, entertainment).

Calculate Income Income: Allowance Paycheck Miscellaneous Interest Money from parents. Wages from a job. Miscellaneous work such as babysitting. Interest and dividends from investments

Expenses Flexible Expenses Fixed Expenses Food Rent Utilities Clothing Entertainment Fixed Expenses Rent Car payment Insurance

Activity 2: Monthly Income and Expense Worksheet Create a monthly income and expense worksheet. Once you know your income and expenses, you can create a realistic budget Create a worksheet with your expected monthly income and expenses. Once you know your income and expenses, you can create a realistic budget or personal spending plan.

Budget: Income & Expenses Actual Difference Job #1 $ Job #2 Other Total Monthly Income Expenses Fixed Regular Expenses Rent Car insurance Car payment Credit card Fixed Irregular Expenses Savings Food Utilities

Budget: Expenses (cont.) Actual Difference Transportation Bus fare $ Gas and oil Parking and tolls Repairs Other Medical expenses Clothing Entertainment Household items Personal items Tuition School expenses Total Monthly Expenses

Increase Income You can increase income by: Part time job Work additional hours Negotiate your salary. Move money to interest bearing savings accounts. Chores Gifts Sell items on-line/yard sale. You can increase income by: Seeking a part time job or work additional hours at your existing job. Negotiating your salary. Moving money from checking to interest bearing savings accounts. Selling items on-line or in a yard sale

Decrease Spending You can decrease spending by: Carry less cash Control your credit card use. Not shopping “for fun”. Remember your savings goals. Buy only what you need. Pay bills on time to avoid fees and charges.

Budget Tools Tools to manage your budget: Monthly payment schedule Monthly payment calendar Computer software Quicken, Excel

Activity 3: Monthly Payment Schedule Sunday Monday Tuesday Wed. Thursday Friday Saturday 1 2 $400 paycheck $25 savings $150 car $25 personal $30 insurance 3 $166 transportation 4 5 $25 interest (income) 6 $30 cell phone 7 8 9 10 11 12 13 14 15 16 $40 phone bill 17 18 19 20 $10 credit card/ loan 21 22 23 24 25 26 27 28 $40 entertain-ment 29 30 Know what you owe before you owe it!

Budget Check Budget a plan for spending and saving money Every month compare your actual income to what you budgeted. Compare actual expenses to what you budgeted. Adjust future budgets to be more realistic.

Increase Income Part time job Work additional hours You can increase income by: Part time job Work additional hours Negotiate your salary. Move money to interest bearing savings accounts. Chores Gifts Sell items on-line/yard sale. You can increase income by: Seeking a part time job or work additional hours at your existing job. Negotiating your salary. Moving money from checking to interest bearing savings accounts. Selling items on-line or in a yard sale

Decrease Spending You can decrease spending by: Carry less cash Control your credit card use. Not shopping “for fun.” Remember your savings goals. Buy only what you need. Pay bills on time to avoid fees and charges.

Help! I Can’t Pay My Bills! You add up your bills and the total is $516, but your income is only $425… What do you do? Pay your rent or mortgage Pay necessary household expenses Pay high-interest loans Talk to your creditors