Personal Finance

Financial Security  Enjoying financial security throughout life is an achievable goal  Budgets and other financial planning tools can help you achieve financial security

Facts  A person with a high school education will earn just over 1 million dollars in a lifetime  What is a lifetime?  Working from the time you are 18, until you retire at around age 62  That’s 44 years

Facts  A person with a college education can be expected to earn more than 2 million dollars in the same time period  No matter how much you make, if your resources are not used wisely, your needs will not be met

Financial Planning  Ongoing process  Takes you from where you are now to where you want to be financially  It’s a way to control your financial resources and your future  The goal of financial planning is to reach goals that are important to you and feel financially secure

Financial Security  The ability to meet essential needs without taking on more debt than you can repay  Financial security comes when you plan

Financial Literacy  Understanding of the basic knowledge and skills needed to manage financial resources  You are aware of financial management options

Budget  A spending plan for the use of money over time based on goals and expected income  Purpose is to take control of your money and spending

Steps To Prepare A Budget 1. Establish financial goals:  direct your money to those things you consider most important  Keep in mind financial goals change

2. Estimate and total your income:  Determine your budget period-weekly, biweekly or monthly  Biweekly-every other week  Income-any form of money you receive- allowance, paycheck  Estimate your income during a typical budget period

 Example: if you receive a weekly allowance from your parents, you should have a weekly budget

3. Estimate and total your expenses:  Expense-the cost of goods or services you buy

Fixed Expense  A set cost that must be paid each budget period

PYF  Pay Yourself First  Determine how much you want to save each month  automatically route your specified savings contribution from each paycheck at the time it is received, before paying anything else  The golden rule of personal finance

Other Fixed Expenses  Rent or mortgage payments  Insurance  Car payments  Loan payments  These expense tend to increase in amount as you move into adult years  As a rule, these expenses must be paid when due  Important to list first in your list of expenses

Variable Expense  A cost that changes both in amount and time it must be paid  Food  Clothing  Medical expenses  Entertainment

Discretionary Expenses  Most teenagers receive basic necessities from their families  So, you spend your money on discretionary expenses  Music  Snacks  Computer games  Movies

 For adults, discretionary expenses are:  Vacations  Gifts  Expensive clothing  Other unnecessary things  Wants

Savings  Allows you to have cash available when an unexpected expense occurs  Car repairs  Unexpected medical bills  Home repairs  Job loss

Charitable Giving  The act of giving money, goods or services for the good of others

4. Analyze Current Income and spending:  Its easy to over or under estimate income and spending  Are your income figures accurate  Subtract your expenses from your income  Do you have money left over, do you come out negative, or are you even?

Negative and Even  You will have to find ways to increase income or cut expenses

5. Prepare a Trial Budget  A plan reduces the temptation to spend carelessly  Keep these records so you can review your financial situation

6. Put Your Budget Into Action  Once you set up your budget, save and spend according to your plans  You will have two columns for planned and actual expenses  When an actual expense is greater than what you planned for, identify the cause  If your estimate was too low, adjust your budget

7. Evaluate your budget periodically:  Financial plans change with significant events in your life  College  Starting a new job  Leaving home  Getting married  Having children

 If you monitor your finances carefully, you income will work well for you over the years