OVERVIEW: WHAT IS A BUDGET? Unit 3 Budget: Don’t Go Broke

Objectives Some of the questions you will be able to answer by the end of this unit are: 1. What is a budget, how does it work, and how can it help you? 2. How do taxes and other payroll deductions affect your paycheck? 3. What does “P.Y.F.” mean and how can it benefit you? 4. How can you make the best use of your cash?

Step 1: The Budget Budget: a plan for managing money during a given period of time It becomes your roadmap for achieving your goals as you set aside specific amounts Income: Money coming in  Job  Allowance  Services for friends and family  Birthday and Christmas money  Yard sale money

Step 1: The Budget Reading your pay stub  Gross income: the total amount of income from your wages or salary before deductions  The number of hours you work times your wage  Your check is usually not the full wage  Payroll deductions  Income taxes—federal and state  Health insurance  Social security (FICA) and Medicare  Retirement savings Open the link. How to Read Your Paycheck Discuss the pay check as a class. Click on the links and talk about earnings, deductions, and so on.

Step 1: The Budget Taxes  Usually the largest deduction  Taxes are fees placed on income, property or goods to support government programs  All levels of government may tax—national, state, local  Federal Income Tax is paid to the federal government to support national programs, like the military  State Income Tax is paid to the state government for state programs, like roads  The employer matches Social Security and Medicare contributions that are sent to the federal government Net Income  Take-home pay, after deductions

Step 1: The Budget Watch the video. Discussion Question: What would you change if you were in charge? How Did We Start Paying Income Tax

Step 1: The Budget Discussion Click on the map below. When you get to the page, click on Oregon. Discuss with a friend the tax load an individual carries in Oregon. Choose a state other than Oregon in which you would like to live. How does its tax load compare to Oregon’s? Take notes on Oregon and the state of your choice in your notebook. this site to yourself for possible placement in your online portfolio.

Step 1: The Budget The W-4  It tells your employer how much tax to withhold from your check  The fewer “allowances” (dependents and marital status) you choose, the more that is deducted  If you are not a good saver, choose “0”; more will be taken from your check and you will have less take-home pay, but will probably get a nice refund  The higher the number you choose, the less taken out, but you may have to pay taxes in April. As a student, you will choose 0 or 1  You complete a W-4 when you start a new job but can change it later Read through a copy of the W-4 provided by your instructor and place it in your portfolio.

The Budget The W-2  It is an summary of wages earned from January 1 to December 31 of the same year  The employer must provide the W-2 by January 31  You use this document to file your income tax by April 15

The Budget Activity Answer the questions on the next page using this pay stub.

The Budget Pay Stub Activity Questions: Copy the questions into your notebook then answer from the previous slide. 1. Who is the employee? 2. Who is his employer? 3. What is the length of the pay period he just worked? 4. How many total hours did he work during this pay period? 5. What amount per hour does he get paid? 6. Did he have any pay other than work hours? If so, what were they for and how many hours? 7. What is his gross income? 8. List the type and amount of each payroll deduction. The state taxes are for New Jersey. Does Oregon have similar taxes? 9. What is his net income? 10. What amount has been available for his financial goals year-to- date?

Portfolio Make sure that the items from this unit are placed in your portfolio. Watch the video. What does it tell you about success? How Bad Do You Want It (Success)

Bibliography TEXT AND ASSIGNMENTS NEFE High School Financial Planning Program, Student Guide. National Endowment for Financial Education. Greenwood Village, CO Page 4: “How to Read Your Paycheck.” Payroll Services. University of Washington: Pullman, WA “How to Read Your Paycheck.” Page 6: “How Did We Start Paying Income Tax?” Brainstuff: How Stuff Works.“How Did We Start Paying Income Tax?” Page 7: “Taxes by State.” Retirement Living Information Center “Taxes by State.” Page 12: Howell, Matthew. “How Bad Do You Want It.” Video.“How Bad Do You Want It.” Images Page 4: “Five Ways to Demonstrate Your E-Learning Success.” The Rapid E Learning Blog “Five Ways to Demonstrate Your E-Learning Success.” Page 9: W-2 and 1099 Tax Statements. myfreetaxes.comW-2 and 1099 Tax Statements. Page 10: “Sample Paycheck and Pay Stub.” New Jersey Payroll Services LLC.“Sample Paycheck and Pay Stub.”