Budgeting Resource 03-04
BUDGETING What is tracking? Tracking is the accounting of spending and receiving money in order to see where your money is going. What is a budget? A budget is a plan that allows you to meet your personal goals with a system of saving and wise spending. What is a want? A want is something that is NOT necessary for survival but that adds to the comfort or pleasure to our lives.
BUDGETING Cont. What is a need? A need is something that IS necessary for survival such as food, clothing and shelter. Components of a Budget Income Fixed Costs Variable Expenses One Time Spends Contingency/Emergency Fund Savings
BUDGETING Cont. Making a budget can help you: Plan for expenses Cut spending Spend Wisely Save for future goals Develop lifelong money management skills
BUDGETING REVIEW Cont. Your budget should be flexible and realistic. In this class you will learn to budget by hand to ensure that you have a clear understanding of the concept. In the future you may want to try to use a budgeting site or app.
BUDGETING OVERVIEW Components of a Budget Income Fixed Costs Variable Expenses One Time Spends Contingency/Emergency Fund Savings
BUDGETING OVERVIEW Cont. Components of a Budget Income: money earned or obtained Salary/Wages Allowance Alimony Loans Savings Social Security Income Child Support
BUDGETING OVERVIEW Cont. Components of a Budget Fixed Costs: expenses that don’t change Rent/Mortgage Utilities (gas, lights, water) Cell Phone Internet Government/ Bank Fees Insurance
BUDGETING OVERVIEW Cont. Components of a Budget Variable Expenses: expenses that change month to month Transportation Travel and events Entertainment Gas for car
BUDGETING OVERVIEW Cont. Components of a Budget One Time Spends: purchases that not often made Furniture Computers Software Gifts Car/Boat/House Contingency/Emergency Fund Savings
Budgeting Formula [(earnings+other income) – (fixed costs + variable expenses + one time spends+ emergency fund + savings)] = Discretionary money (money left over)
Business Scenario You are a high school student with a part time job making $600 dollars a month. You live at home but you have to pay for your own phone. You have 3 options: Droid or Iphone. Plans for Droid: $60, $70 or $80 and Iphone plans $75, $85, $95. You spend $50 dollars on public transit monthly. You help your parents with household items of about $30 a monthly. You are trying to save up for a car. What is income? What are variable expenses? What are fixed costs? What cell plan did you select? How would you put together a budget?
KNOWLEDGE CHECK You are a student at Xavier University. You have $500 in savings. You receive a grant that covers your tuition and books as well as room and board. You take a part-time job which pays you $150 per week. You have to pay for utilities (water& electric), cell phone bill, internet, food and entertainment. Analyze the situation. Describe in detail how you would come up with a budget and what would be included in the budget. Remember to identify the components. No calculations needed.
EXIT TICKET What is a budget? What are two of the components in a budget? Give me two examples of income? Give me an example of a fixed cost? What is a contingency fund?