Chapter 3 Budgeting Budgeting 101

Learning Outcomes Budgeting 101 Understand the purpose of cash flow planning Identify reasons why people don’t do budgets or have trouble following them Identify changes in spending behavior that contribute to wealth building Understand the difference between a cash flow statement and a budget

Learning Outcomes The basics of banking Develop a filing system for keeping financial records, both paper and electronic Describe recordkeeping features that financial institutions provide for online account management Discuss different payment methods and banking features

Learning Outcomes The importance of having a zero based budget Define zero-based budget Develop a plan for spending and saving that has both long-term and short-term components Analyze how changes in circumstances can affect a personal budget

vocabulary Budget-A written cash flow plan Cash Flow Statements-A summary that shows total income and spending for a given time period Carbon Check-A copy of each check you write (often digital) Envelope system-Series of envelopes that are divided into categories (food, gas, entertainment, tithes, etc.) and are used to store cash for planned monthly expenses Impulse Purchase- An item that is bought without previous planning or consideration of the long term effects Overdraft-Occurs when money is withdrawn from a bank account and the available balance goes below zero Reconcile-To match your bank statement with your checkbook Zero-Based Budget-A cash flow plan that assigns an expense to every dollar of your income, wherein the total income minus the total expenses equals zero Variable Expense-Expenses that vary from month to month. (Electricity, Water Bill) Fixed Expense-Expenses that will not change from month to month. (Mortgage, Insurance, Center pointe Bill) Discretionary Expense-A expense that is not essential for a home or business to function. (Vacation, Ent., Cable)

Agree or Disagree It is important to know how to live within my means and have good money habits I expect and would like my parents to stop supporting me before age 25 I am knowledgeable about money management, including budgeting and saving I am prepared to deal with the adult financial world after school I know how to balance and reconcile my checking account I know how to write a check I have more than $100 in savings

Four Reasons People don't do Budgets What is a budget and why do people avoid them? It has a negative connotation. A budget has been used to control them or someone. They've never have had a budget that has consistently worked. Afraid of what they will find if they take a closer look. They may need to change and that is hard for people at times.

Simple habits that can build wealth Live on less than you make. Get in the habit early of not spending every dollar you make. Keep on learning and finding ways to grow your income. Don't allow this to be your one and only finance class! Write a monthly budget that includes saving, giving and spending. Stick to it. Harder than you think! Plan your spending and avoid impulse purchases. Pay yourself first. (SAVE) This means assigning a portion of your income to saving and investing every month. Use gifts and extra money wisely. You might be tempted to just blow money that you receive as a gift. It is okay to treat yourself with a portion but it is wise to use a portion of extra money towards a money goal (getting out of debt, savings, investing, etc.)

Ten Things Millionaires DO Not Do From the book “The Millionaire Next Door” Buy brand new cars Eat out on a regular basis Replace what is not broken Impulse buy Carry debt Visit the tanning bed Buy brand name clothes Desire instant gratification Socialize with people that waste money Spend more money than they earn

Discussion In what way is money active? Why is it important to have a cash flow plan? Why do some people avoid writing or following budgets?

Chapter 3 Budgeting Banking Basics

Financial Service providers Use your iPad to research and complete the below chart about financial institutions. Type of Institution Brief Description Key Services Offered Commercial Banks Brokerage Firms Credit Unions Savings and Loans Accounting Firms Insurance Companies

Financial Service providers Commercial banks-Provide services such as excepting deposits, giving business and auto loans, mortgage lending, and basic investment products like savings accounts and certificate of deposits (CD's) Examples-Capitol one, Bank of America, Wells Fargo, HSBC Bank Brokerage firms-Financial institution that facilitates transactions of financial securities between buyers and sellers. Ameritrade, Scott trade, Fidelity Credit unions-Member owned financial institution. These institutions are created and operated by its members and profits are shared among the owners. Houston Federal Credit Union, First Community Credit Union, Texas Dow Employees Credit Union Savings and loans- Very similar to commercial banks in the way that these institutions function. Historically can offer higher investment rates because of the lack of a third party.

Financial Service providers Accounting firms-Systematic recording of a businesses financial transactions having to do with the business side of the company. PricewaterhouseCoopers, Saudi Aramco Insurance companies-Provide a measure of financial security in the case of? State Farm, New York Life, Northwestern Mutual, Farmers, Medical Insurance

Banking Tools Writing Checks Online Bill-Pay Debit Card Purchases (In store and online) Account Transfers Debit/Savings Tools Online Record Keeping and Statements ATM Mobile Banking-Apple Pay