Money Management 28.2

Objectives Discuss the importance of budgeting. List the steps for preparing a budget.

The Main Idea Meeting your financial goals requires you to know your income and expenses. A budget can enable you to track your spending and make choices about your money.

The importance of budgeting Money management is necessary for consumers, businesses, and governments. A budget helps people set financial priorities. A budget is a recording of Your expected income Your expected expenses Your planned savings

The Importance of Budgeting Consumers, businesses, and governments must figure out how to utilize their income. Most people want more goods and service than they can afford Budgeting helps you set priorities

Average Household Expenses If a family earns $3,000 a month, how much money would they likely spend on housing?

Preparing a Budget There are 7 steps in preparing a budget Set Your Financial Goals Estimate Your Income Budget for Unexpected Expenses and Savings Budget for Fixed Expenses Budget for Variable Expenses Record What You Spend Review Spending and Saving Patterns

Step 1: Set Your Financial Goals As you prepare to set your financial goals, you should consider several questions. What do I want to accomplish in the next month, year, five years? What is important to me? Are my goals practical? You might find it helpful to separate your goals into short-term, intermediate, and long-term goals.

Step 2: Estimate Your Income Start your budget by recording your estimated income for the next month. Include all sources of income that you know you will receive Your gross pay is reduced by various deductions. Deductions include: Taxes Insurance Retirement contributions Your take-home pay (after deductions) is called your net pay

Step 3: Budget for Unexpected expenses and savings You have to plan for expenses such as food, rent, and clothing to satisfy your basic needs Unexpected expenses include medical visits or accidents Savings make it possible for you to meet future wants and needs

Step 3: Budget for Unexpected expenses and savings I WISH!!! In your budget, make sure that the total income figure is the same as the total for planned expenses and savings. If your planned expenses and savings are more than your income, you will have to cut expenses or find additional income

Step 4: Budget for Fixed Expenses Expenses that occur regularly Fixed Expenses include: Rent Insurance Car loan

Step 5: Budget for Variable Expenses Expenses that change and can be controlled more easily that fixed expenses Variable expenses include: Food Phone charges Entertainment Gifts

Step 6: Record what you spend Keeping track of your expenses will help you revise your budget if necessary. The budget variance is the difference between your budgeted amount and the actual amount you spend It can be a surplus (extra money) or a deficit (not enough money)

Step 7: Review Spending and Saving Patterns You need to review your budget each month and consider making changes.

Assignment Think about what your financial goals are. Do you want to go to college, buy a car or go on a school trip? Write a 300 word essay that explains how making a budget can help you reach you goals. How do you plan to save up enough money to reach your goals?

Assignment Complete Worksheet Packet for 28.2 Complete questions 2-14 on page 508/509