Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt PERSONAL FINANCIAL MANAGEMENT Chapter 3

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt OBJECTIVES Describe the importance of personal financial management Identify the significance of money management and budgeting Create a personal budget Recognize money wasters Identify debt and debt-management resources Describe the importance of savings and investments

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt FINANCIAL MANAGEMENT Personal financial management: the process of controlling your income and your expenses

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt FINANCIAL MANAGEMENT Income Income: money coming in Income may come from: –Parents –Student loans –Job After college, your income most likely will increase

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt FINANCIAL MANAGEMENT Expense Expense: money going out Common college expenses include: –Tuition –Text books –School supplies –Housing –Transportation –Hobbies and entertainment These are life needs

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt PERSONAL FINANCIAL MANAGEMENT AFFECTS WORK PERFORMANCE Finances help you reach life goals Keep debt under control Begin a savings and investments plan now Personal financial management can affect your work situation

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt YOUR PAYCHECK Do not overdo spending Now is the time to manage your money Create a budget to help you reach your goals Financial success begins with discipline and planning

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt MONEY MANAGEMENT Budgeting Budget: a detailed financial plan used to allocate money for a specific time period Reflects your goals Controls and prioritizes spending Be honest and precise when creating a budget

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt MONEY MANAGEMENT Cash Management Cash management is the key to good budgeting Carry a small amount of cash Be careful about using debit cards Reduce trips to the ATM Write checks instead of using cash Record all transactions

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt MONEY MANAGEMENT Steps to Creating a Budget 1.Identify goals 2.Attach financial goals to personal goals 3.Determine monthly income (money in) 4.Determine monthly expenses (money out) –Budget on a monthly basis –Keep track of all spending –Reduce money wasters

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt MONEY MANAGEMENT Fixed expenses: expenses that do not change from month to month Flexible expenses: expenses that change from month to month Money wasters: small expenditures that you do not realize are actually using up a portion of your income

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt DEBT MANAGEMENT Debt management involves: –Debt –Interest –Net worth –Assets –Liabilities

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt DEBT MANAGEMENT Steps to Get Out of Debt Do not create additional debt Prioritize your debt Pay off the smallest amount or the amount with the largest interest first Take the extra cash from a paid-off debt and apply it to the next debt on your priority list

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt TALK IT OUT What are warning signs that you may be getting into debt?

Copyright ©2011 by Pearson Education, Inc. publishing as Pearson [imprint] Professionalism: Skills for Workplace Success, 2/e Lydia E. Anderson Sandra B. Bolt SAVINGS AND INVESTMENTS Do not wait Rule of thumb: Have at least five months’ income saved for emergencies Have savings in a bank Determine if you should use a regular savings account or a Certificate of Deposit Start investing now