Money Management: Part 1

Homework (Passport page 18)

How’s It Going?

Money Management Tracking our Spending Setting Goals Creating a Budget

What Do You Know? (Pre-Test page 4)

Let’s Talk About You

Did You Know? 61% of U.S. households don't have a budget. More than 11 million Americans have no idea how much they spend on food, housing and entertainment and don’t keep track of overall spending. 24% of U.S. households report not paying all their bills on time. 1 in 3 adults (34%) carry credit card debt from month-to-month. 15% or 35 million people carry $2,500 or more of credit card debt monthly. 32% of U.S. adults do not save any portion of their income for retirement, and 34% have no emergency savings. Source: April 2014 Consumer Financial Literacy Survey by Harris Interactive, Inc

Budgeting Process Organize Data Periodic and Goal Spending Build Budget Evaluate and Adjust Plan Tracking Data Collection

Tracking Your Spending Write down where your money goes ~ every dime, every dollar. Consider the automatic spending that you may have in place (payroll withholdings, EFT payments, child support, etc.). Track it for a minimum of two weeks ~ preferably for a month. Where are your temptations? What needs to be controlled? Is it a want or a need?

Separating Wants and Needs WantsNeeds Home phone (landline) Cell phone(s) Cable or satellite television High-speed internet access Gym membership or other memberships Eating out at restaurants A second or third vehicle for kids to drive Vacation trips New clothing for every style and season Purchasing music, books or other hobby items Going to concerts, movies or other events Being able to buy lunch instead of “brown bagging” it

Types of Expenses Fixed Variable Periodic Discretionary Non-discretionary

Organize Data TRACKER$$ X-Mart: apples, socks, paper $ Car Payment$ Convenience Store: gas and coffee $35.97 Electricity$ Rent$950 Restaurant: lunch$8.23 CATEGORY$$ Groceries $ 5.39 Eating Out$ 9.66 Auto$ Misc$7.25 Housing$1, Clothing10.95

Spending Tracker By Category Week 1Week 2Week 3Week 4Total Housing Groceries Auto Debt100 Entertainment Clothing50 Savings Medical Miscellaneous Investments Education/Childcare Charitable

Budgeting for Periodic Identify the cost and the timeframe for the expense: –Example: Each June, I pay $360 in personal property taxes. –Quarterly, I pay $180 for car insurance. Break the cost into monthly costs: Personal Property $360 for 12 months = $30 per month Insurance $180 for 3 months = $60 per month

Planning for the Periodic Frequency# of MonthsAmountMonthly Property Tax Annual12$360$30 Insurance Quarterly3$180$60 Furniture/Appliances Every 3 years36$720$20 Home Repairs Annual12$600$50 Car Maintenance/Repair 2 times per yr.6$300$50 Membership/Dues Annual12$60$5 Holidays/Birthdays Annual12$1200$100 Subscriptions Annual12$60$5 Vacation Annual12$1200$100 Weddings/Events Annual12$120$10 Tuition/Books/School 3 times per yr.4$400$100 Clothing Quarterly3$120$40

Planning for the Periodic ExpenseBudgetSpentSaved January School/Clothing February Insurance March Car Maintenance April Taxes/Clothing/School May Insurance/Graduation June Personal Property/Birthday July Clothing/Vacation5701, August Insurance/Back to School September Car Maintenance/Dues October Clothing/School November Insurance December Holidays5701,

Setting Goals Short-Term Goals: less than one year Long-Term Goals: more than one year S.M.A.R.T. Goals

S pecific: State exactly what is to be done M easurable: Include how the goal can be measured A ctionable: Determine steps to reach the goal R ealistic: Do not set goals for something unrealistic T ime-Bound: State when the goal will be met

S.M.A.R.T. Financial Goals Goal: I want to buy a new car S.M.A.R.T. goal: –Specific: I want to save money for a down payment on a new car. –Measurable: I need to save $2,000 for the down payment. –Actionable: I will save $50 from every paycheck ($100 a month). –Realistic: I usually spend $200 a month on dining out and coffee drinks, so I’ll cut that spending in half and put the rest towards my down payment. –Time-Bound: I want to have the $2,000 saved in two years.

Budgeting for Goals Identify the cost and the timeframe for the goal: –Example: I want to save $3,000 over the next two years for a down payment on a new car. Break the cost into annual costs –$3,000 for 2 years = $1,500 per year Divide annual cost by 12 to get monthly amount needed: –$1,500/12 = $125 monthly

Prioritizing Goals Rank Goals in order of importance. –What is your number one priority? –Engage the entire family. Prioritizing Goals helps when evaluating spending choices. When there are conflicts among goals, highest priority wins.

Strategies for Goals When conflicts arise for achieving goals: 1.Evaluate: What is really most important? 2.Can one goal be adapted (modified) to allow both to be achieved? 3.Can I generate income or reduce expenses to make both goals possible?

Problem Solving Goal: Have $1,000 saved for holidays so that you can purchase gifts and visit family members in another state. Conflict : You also need $800 to purchase books for the January semester of college. You are working to complete your degree. It is currently September, and you don’t think you will have enough money for both. What are your options?

Creating YOUR Budget Your spending trackers. –Remember, you’ll need at least two weeks worth of data, but more is even better. Historical data from paystubs, bank and credit card statements. Your S.M.A.R.T. goals and other priorities (paying off debt, vacation, etc.). –Be sure to record how much money you’ll need for these. Your income and expenses ~ fixed, variable and periodic.

Tracking/Collecting Data WHERE DID $$$ GO? HISTORICAL RECORDS WHERE SHOULD $$$ GO? FUTURE PLANNING Spending TrackerEmergency Savings Bank StatementsPeriodic Expense Planner Credit Card StatementsS.M.A.R.T Goals Computer/Online: Quicken/Mint/etc. Debt Repayment

What Have You Learned? (Post-Test page 18)

Homework (Passport page 22)

Questions?