NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money Unit 2 - Budgeting: Making the Most of Your Money

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money What is a spending plan? A plan for managing your money during a given period of time. It will prepare you financially for the future. Has two parts: Income and expense

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money Advantages of a Spending Plan (Budget)  …Helps you determine where you are spending your money currently.  …Helps you decide where to spend your money in the future.  …You have an organized way to save for things that cost more.  …Puts you in control of your financial future, beginning NOW. 2-B-1 321

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money Advantages of tracking your spending habits To show where your money is really going To use the information to create a budget to plan spending To compare to see how well spending habits meet your financial goals

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money People Without a Budget…  …Are less likely to know what they have.  …Have no plan, often coming up short before their next paycheck or allowance.  …Are almost certain to have no plan to save for more expensive spending goals. 2-B-2 321

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money How to Build a Budget 1.D ecide on a time frame for tracking expenses (week, two weeks, month). 2.L ist all money you have coming in (income). 3.M ake categories for all expenses. 4.S ubtract total expenses from income. 5.S tudy your budget and your financial plan to make sure it fits with your plans and goals. 2-F 54321

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money Questions  Does it makes sense to create and live within a budget?  Should you plan a budget for a specific period of time?  What if you find that you are consistently spending more in one area than you had planned to?  What if you find that you can’t live within your budget? 2-B-3 321

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money There are two parts of a budget: Income and Expense Expenses- Any money you spend Fixed- Cost the same amount every time Variable- Expenses that are not fixed Periodic/Occasional- You don’t pay every month, and can be fixed or variable. Income ANY money you receive What do you think? Should income and expenses balance each other?

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money 2-C FIXED, VARIABLE, OR PERIODIC? ExpenseFixedVariablePeriodic Loan Payment Electric Bill Twice-yearly Insurance Payment Gas Phone Bill

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money 2-E NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money Personal Plan for One Week

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money Payroll Deductions Federal tax State tax Medicare tax Social Security tax Why do we have taxes? To pay for: road maintenance, public schools, recycling, garbage pickup, armed services, to support the disabled and the elderly

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money Where does this money go? Social Security Tax- to provide a small income and other services to the elderly, disabled Americans, and orphaned minors Medicare Tax- Provides medical insurance to the elderly, and to some disabled Americans

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money Taxes! Everyone MUST pay taxes!! Even if you are self employed When looking at a paycheck you will see two figures: –Net income: “after” taxes, or “take home pay” –Gross income: before taxes, and before any payroll deductions

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money Tax Documents Form W-2- The earnings summary you should receive every January from each employer you worked during the previous year, stating your gross income from that job, and how much you paid in taxes. Form W-4- This document allows the employer to take out taxes from your paycheck for federal income tax.

NEFE High School Financial Planning Program Unit Two – Budgeting: Making the Most of Your Money PYF PYF stands for “pay yourself first” You should immediately put aside a certain amount of money every paycheck Experts say that Americans should have at least 3 months of expenses saved and available at all times