Chapter 8 Budgets and Financial Records MYPF Chapter 08 11-Sept-2001 Chapter 8 Budgets and Financial Records Budgeting and Record Keeping Legal Documents and Filing Systems

Lesson 8.1 Budgeting and Record Keeping Describe and prepare personal budgets. Explain the purpose of record keeping. Prepare a personal net worth statement and a personal property inventory. © South-Western Educational Publishing

Importance of Financial Planning Disposable income—money you have left to spend or save after taxes haves been paid Financial plan—a set of goals for spending, savings, and investing the money you earn

Financial Planning Helps You to: Determine and evaluate options for your money Prioritize your options so your money goes as far as possible Avoid careless and wasteful spending Organize your income so you can achieve your financial goals Avoid money worries by planning your saving, spending, and borrowing to live within your means

Achieving Your Financial Goals First step is to prepare a budget Budget is a spending and saving plan based on your expected income and expenses Money coming in must equal money going out

Preparing a Budget Estimate your income. Decide how much to save. Estimate your expenses. Balance your budget.

Simple Budget Income Work $320 Allowance 20 Lunch money 40 Expenses Lunches $ 80 Supplies 20 Snacks 40 Entertainment 120 Total income $380 Total expenses $280 Savings To credit union $100 Total expenses plus savings $380

Monthly Budget Fixed expenses Variable expenses Costs you are obligated to pay on a regular basis (i.e., rent or mortgage, car payment) Should equal no more than 50-60% of net pay Variable expenses Costs that vary in amount and type, depending on events and the choices you make (i.e., eating out, vacations)

Personal Records 4 types of personal records a person should keep: Records of income and expenses (W-2 forms, bank statements, investment statements, receipts for charitable contributions, medical expenses, etc.) Net worth statement Personal property inventory Tax records

Records of income and expenses Examples include W-2 forms, bank statements, investment statements, receipts for charitable contributions, medical expenses, etc.

Net Worth Statement Assets – Liabilities Net worth Net worth statement is a list of items of value (assets), amounts of money owed to others,or debts (liabilities), and the difference between the two, which is a person’s net worth. Assets – Liabilities Net worth

Personal Property Inventory A personal property inventory is a list of all valuable items a person owns, along with their purchase prices and approximate current values Item Year Purchased Purchase Price Approximate Current Value

Tax Records Keep copies of tax returns, W-2 forms and other tax receipts for at least three years

Lesson 8.2 Legal Documents and Filing Systems Discuss the elements of legal contracts and your responsibilities regarding contracts. Describe negotiable instruments and warranties. Discuss ways to set up a filing system for personal records. © South-Western Educational Publishing

Types of Contracts A contract is a legally enforceable agreement between two or more parties Express contracts Oral Written Implied contracts

Elements of an Enforceable Contract Agreement Consideration Contractual capacity Legality Genuine assent Legal form

Consumer Responsibilities in Agreements Understand agreement. Keep a copy of the agreement. Be sure the agreement is dated correctly. Be sure all blank spaces are filled in or marked out. Be sure all terms agreed upon are written clearly. Be sure all dates, amounts, and other numbers are correct and clearly written. Be sure proper disclosure is made by the seller. Be sure all cancellations and adjustments are made in accordance with the contract.

Negotiable Instruments Must be in writing and signed by the maker Must contain an unconditional promise to pay a definite amount of money Must be payable on demand or on a fixed or determinable future date Must be payable to the order of a particular person or to the holder of the note Must be delivered to the payee

Warranties Guarantee Limited warranty

Filing Systems for Personal Records Paper filing system Electronic record keeping Spreadsheet Database

Home Filing System Medical Warranties Insurance Utilities Household Travel Entertainment Taxes Automobile Subscriptions