Budgeting Plan for managing your money during a given period of time Changes with income/priorities

Step 1: Income Income Income Taxes Taxes Cash Flow The money you have coming in, as well as the money you have going out

Step 2: Expenses Expenses What you spend money on (needs and wants) Type 1: Fixed Costs the same amount every time Ex: home, car loan Type 2: Variable Fluctuates in amount- more control Ex: food- groceries Type 3: Periodic/Occasional Don’t pay every month Ex: dance expenses, auto repairs are ones you don’t pay every month,

Step 3: Organization Checking account statements Balance your checkbook every month File all statements for a year Savings and investment statements Check, then file Pay stubs Mistakes? Save until you file taxes

Step 3 continued Tax documents W-2s you receive, tax documents for any checking, savings, investment accounts April 15 Insurance statements “Declarations” pages Coverage and deductibles Loan and credit card statements. Amount applied to reduce your interest, and the amount applied to reduce your principal Show purchases, payments, finance charges, and current balance Receipts and warranties for big-ticket items Big purchase- computer, bike, car repairs, etc. Warranties- help get an item fixed/replaced

Step 3 continued Methods to organization Methods to organization The Envelope System The Envelope System Checking Account Register Checking Account Register Budget Spreadsheet Budget Spreadsheet Personal Finance Software Personal Finance Software

Saving Saving Saving Income not spent Income not spent Most important- PYF Most important- PYF 10% of net income 10% of net income Non-interest bearing account No interest is paid on the principal—that is, the amount of deposit or account balance Interest The price of using someone else’s money Money in the bank/account holder interest Compound interest- computed on the sum of the original deposit and any accumulated interest. Ex: account that pays 5 percent interest “compounded semiannually” means that every six months 1/2 of 5 percent, i.e., 2.5 percent, interest is paid on the principal and any accrued interest.

Saving- Rule of 72 Rule of 72- an easy way to estimate how long it will take their money to double at a certain interest rate