Budgeting and Cash Flow Management

Objectives Describe the relationship between financial planning and budgeting. Understand how to set and achieve long- and short-term financial goals. Establish the structural and mechanical aspects appropriate for your personal budget.

Objectives Resolve conflicting financial needs and wants. Describe the key aspects of the implementation phase of budgeting. Illustrate the methods and techniques to keep income and expenditures within planned budget totals.

Objectives Perform the tasks of the evaluation phase of budgeting. Explain the techniques of talking effectively about money.

Budgeting and Cash-Flow Management IF YOU FAIL TO PLAN, YOU PLAN TO FAIL! To succeed in money matters requires implementation of financial plans.

Financial Planning and Budgeting Financial planning Budgeting Values Goals

Comparison of Statements PAST Income and Expense Statement (Cash Flow Statement) PRESENT Balance Sheet FUTURE Budget

Six Phases of Budgeting Set GoalsOrganizeDecideImplementControlEvaluate Achieve success in financial goals Monitor, review, revise after each period.

Setting long-term goals—anything more than 12 months away. Developing short-term goals from long-term goals Prioritizing goals Making goals time and dollar specific Financial Goal-Setting Phase of Budgeting

Select recordkeeping format Use cash or accrual basis Select budget classifications Select time periods Organization Phase of Budgeting

Inflation and other economic factors Realistic budget estimates Reconciling initial estimates Decision-Making Phase of Budgeting

Implementation Phase of Budgeting Recording actual income/expenditures Managing with a cash-flow calendar Utilizing a revolving savings fund Calculating time-period totals

Control Phase of Budgeting Stay on target Check progress Be alert to problems or errors REASONS FOR BUDGET CONTROLS:

Control Phase of Budgeting Use a checking account Employ a credit control sheet Check accuracy Monitor unexpended balances BUDGET CONTROL MEASURES:

Control Phase of Budgeting Justify exceptions Use the envelope system Employ subordinate budget BUDGET CONTROL MEASURES:

Evaluation Phase of Budgeting Compare estimated and actual amounts Decide how to handle balances Assess progress toward goals

Discussions About Money Unilateral Shared Divided MONEY MANAGEMENT AND FINANCIAL DECISION MAKING FOR COUPLES:

Discussions About Money More income/more expenses Reliance on “second” income Discretionary account for each individual COMPLICATIONS FOR DUAL-EARNER HOUSEHOLDS:

Discussions About Money Child support Alimony His/Her/Our children His/Her funds COMPLICATIONS BROUGHT BY REMARRIAGE:

Freedom Trust Self-esteem Guilt Indifference Envy Security/Comfort Power/Control Discussions About Money EMOTIONS AND MONEY:

Get to know yourself and partner Learn to manage disagreements Use “I” not “you” statements Focus on commonalties Be honest Talking About Financial Matters

Develop Money Sense in Children Give access to money Give freedom to save and spend Teach responsibility Allow freedom to fail Talk about family finances

Your Personal Spending Style Givers Me-spenders Big-spenders Tightwads Normal People

Couples Should Discuss Personal Finances Child bearing Employment Food and clothing Housing and transportation Recreation and vacations Future security and debt