BUDGET What is it? How do you know if you need one?

Budget A guide to spending and saving to help people reach their goals…..like a road map for spending.

You need a budget when... You wonder where the money goes??

You need a budget when... You fail to have cash set aside for emergencies

You need a budget when... You fail to have money set aside to reach your goals.

You need a budget when... You use credit as a substitute for money

You need a budget when... You overdraw from your checking account

You need a budget when… You tend to over estimate income and under estimate expenses.

You need a budget when... You find it hard to pay expenses, overdue bills.

You need a budget when... You tend to let tomorrow take care of itself, no future planning.

Budgeting successfully depends on how well you set your financial goals. Goals should be prioritized and ranked from most important to least important. The goals you set affect your family, future family, and community. The best way to create an effective budget is to establish a filing system and keep accurate records. You can use the following to prepare a budget worksheet: word processor, spreadsheet or data base, or a computer generated program. Budgeting

A plan for dividing up your income among spending and saving options. Most budgets are based on short term and long term financial goals First step: Determine your goals Short Term Goals: Things you hope to achieve in less than 1 year Long Term Goals: Things you hope to achieve in more than 1 year Budgeting

Budgets are based on your NET income (pay after deductions) Gross Income: Total income before deductions Income -Deductions =NET income-Take home pay after deductions

Budgeting: Deductions Required By Federal Law Federal Income Tax: Acts as a prepayment for the required Federal Tax due every April 15. Internal Revenue Service (IRS) is the government agency responsible for collecting Federal Taxes FICA-Federal Insurance Contributions Act Social Security is a fund managed by the government in which payroll deductions are required to provide money for disabled workers, dependents of the deceased and retired workers. Other deductions may be an elective: health, life, savings, union dues, pre-paid taxes

Budgeting When devising your budget you want to include all possible expenses Fixed Expenses: Same each month or committed to spend each month: mortgage, rent, loan payments, car insurance, cell/telephone, utilities, charge accounts Flexible/Variable: Different each month. More choice involved about spending. Food, clothing, recreation, entertainment, dining out

Budgeting Vocabulary Disposable Income: Money that can be freely spent, not allocated towards any goals Periodic Expenses: Expenses that come up occasionally Spendable Income: Amount remaining after deduction taxes and FICA from income

Budgeting Financial Experts have developed the following “Rule of Thumb” Guidelines for the % of our income we should allocate for each category. To help devise our own personal budgets. This is known as %Goal on our budgets.

Budgeting Savings-10% Clothing-purchase/repair 5% Utilities-electric, water, phone 5% Health/Personal-medical, grooming 10% Food-groceries 20% Housing-rent/mortgage, repairs 30% Car Expenses-payment, operating costs, repairs 15% Entertainment-movies, dining out 5%

The Latte Factor I understand that I could be putting the money from a $4 latte into retirement but I don’t get why it’s important. I would rather have a latte than have $4 when I’m old.

Latte Factor You walk into a coffee shop on your 25th birthday and plunk down $4 on a latte, that $4 goes away. If you just took that $4 and stuck it under your mattress for 40 years, you’d just have $4 when you’re 65. But if you took that $4 and put it in an investment that earns 5% (like a treasury note) for 40 years, you would have $28.16

Latte Factor Okay, let’s say that you drink just one latte a week for just your 25th year on earth. That’s 52 lattes, a total of $208. In that same investment, you would have $1, when you’re 65.

Latte Factor Let’s say again that you buy a latte a week until your 65th birthday. That’s 2080 lattes, which costs a total of $8,320 (and that assumes the price will not go up for 40 years, which means it’ll be more than that in reality). With that same investment, you’d have $26, at age 65.

Latte Factor Let’s say that you drink three lattes a week (not unreasonable for a latte drinker). That’s 6,240 lattes, which costs a total of $24,960 (again, with no price increase). If you just buy that same 5% investment, you would have $79, at retirement.

Latte Factor Now, let’s say instead of buying a treasury note, you put that money in the Vanguard 500, which has earned 12.14% annually since inception in If we can expect that same return, you will have $558, at retirement.

Latte Factor Drink a latte daily? You’re losing $931, at retirement. A morning latte and an afternoon latte? $1,862,

This is the power of the “latte factor.” It’s not a single choice to buy a latte that’s powerful, it’s a regular purchase of a latte combined with the power of compound interest that makes it powerful. Obviously, the huge numbers quoted here are indeed in future dollars, but even with 4% annual inflation, you’re still tossing away $387,897 in today’s dollars just on your two lattes a day. That’s the foundation of a good retirement, tossed away on a frivolous part of a daily routine.

What’s your Latte Food Movies Senior lunch Hobby supplies Gasoline Music

Latte

Latte Activity

Budget Project

MICROSOFT EXCEL Is a spread sheet with vertical lettered columns. Horizontal numbered rows Cells are formed and identified by the corresponding letter & number.

Cells Can hold alphabetic characters, like words. Can hold numeric information, or numbers Can hold a formula that calculates numbers and displays the answer.

Rows (as it relates to a spreadsheet) horizontal division -numbered range of cells words or numbers can be put in. Rows

Columns (As it relates to a spreadsheet) Vertical division -Alphabetic reference to an array of cells -Can hold alphabetic characters like words, numeric information for example, numbers.

An equation that performs operations and can refer to different cells. Must begin with an = sign within the excel program Total sum function=Σ Formulas

Landscape Print: Page Set up-Landscape

Page Set Up-Margins Left and Right margin 0

Gridlines: Page set up-Sheet

Special Notes Columns Width Dollar Signs Landscape Print Gridlines Right and Left Margins Recommended Percents