1. 12- Budget and Spending Net Worth Budgeting Spending Taxes

2. Net Worth Asset- anything of value own by you. Example in college: – Textbooks – Not payments for tuition or meal plans If you have a collection they are consider asset. – Stamp collection – Baseball card collection – Bank account – Skateboard – Bike – Etc.

3. Net Worth Liability- what you owe to someone else. Think of a liability as a IOU. Its money you owe: – Your dad – Your mom – Your sister – Your brother – Your friend/business partner Think of a home “Mortgage” as a liability. It never changes from month to month but you have to pay it. It’s money you owe the bank yet you are still making payments on your house. Car Loans Credit Loans

4. Net Worth Assets – Liabilities = Net Worth Net worth – Net income – Net loss To find out a person’s net worth they have to calculate and compare the total value of assets and liabilities.

5. IF assets are greater than Liabilities then you have a “Net Worth.” Net Loss is when Liabilities are greater. In this example you have a Net income because your assets are greater than Liabilities.

6. Net Worth Below is a list of Amanda’s Assets and Liabilities She only has two liabilities (Credit Card and Student Loans) Net worth = Total Assets ($5,025) – Total Liabilities ($3,350)

7. Net Worth

8. Net income $2,700 – Expense $1,300 = $500

9. BUDGETING Net income vs. Gross income Fundamental Budgeting Creating a budget

10. Budgeting Gross Income Your Salary for the year What you make an hour What your employer promises to pay you Net Income Money received after taxes. After paying medical coverage After paying of dental coverage After investing in retirement savings. Taxes and other withholdings will decrease net income.

11. Budgeting To change Gross income someone will need to make more money. Plan to pay for all your expenses at the beginning of each month. (especially if you get paid on a monthly basis). Best Advice: Calculate monthly budget at the beginning of each month. If you see a tax increase it will affect your gross income. If you wanted to change your gross income you need to make more money.

12. Budgeting Short Term goals: – Buying Movie ticket tonight – Music concert this weekend – New car Long Term Goal – Retirement – Saving money for a house Variable Expense (change each month) Mandatory expense – Transportation – Utilities (water, electric, and gas) – Groceries Fixed Expense: Rent Cable/internet

13. Budgeting Discretionary income – The amount of an individual's income that is left for spending, investing or saving after taxes and personal necessities (such as food, shelter, and clothing) have been paid. – Discretionary income includes money spent on luxury items, vacations and non-essential goods and services. – Savings could be taken from discretionary income

14. SPENDING Good spending choices Leasing vs. buying a home

15. Spending How do you manage your money? Use a debit card all the time? Or do you take cash from the ATM and see how much is left in your account every time you make a withdrawal? Advertising – mainly used to influence customers to spend on their products Brand Loyalty Celebrity endorsement Cheesy catch phrases or tunes.

16. Spending Comparison shopping: 1.Compare the two product features 2.Assess the purchase objectively 3.Use the chosen product 4.Reflect upon the purchase

17. Spending Companies know that people will be willing to spend more to get an in-demand product. That is why prices increase when demand is high for a product. Advice: Buy in bulk (price per item decreases) Buy the car in full so you don’t have to pay more on interest.

18. Spending Marginal Benefit – The additional satisfaction or utility that a person receives from consuming an additional unit of a good or service. A person's marginal benefit is the maximum amount they are willing to pay to consume that additional unit of a good or service. In a normal situation, the marginal benefit will decrease as consumption increases. Marginal Cost – Marginal costs are defined as the overall change in price when a buyer increases the amount purchased by one unit.

19. Spending Buying You own it Good for permanent living. Also to build up equity and credit for assets. Best way to purchase a large item is with cash. – No online fees – No check fees – Just straight up cash Leasing Not yours. You have it for a time period for 2-3 years. Good if you have to relocate in a couple years Pay less on maintenance and repairs Sometimes its better to rent a house because you might have to relocate in a couple years for your job.

20. Spending Finance Contracts Requires credit check Includes rate information Must be signed for rent- to-own agreements When you lease a car: Mileage restriction Return the car after the lease ends Penalties for ending lease early.

21. Taxes Describe the types of income taxes that citizens pay. Analyze important tax documents that are required to pay taxes. Explain how taxes on purchases can be calculated.

22. Taxes Biggest dates to remember: January 10 th w-2 sent out – W-2 form contain how much has been earned – Also W-2 contains how much has been withheld for taxes April 15 th Taxes due – Federal – State – local Type of taxes US citizens pay: Federal taxes State Taxes (progressive) Local community Taxes (progressive)

23. Taxes On your w-2 the federal government takes out several payroll taxes: Social security tax Medicare Tax Retirement Etc. Federal Tax Revenue

24. Taxes To your right are the deductions typically taken from each pay period. Income is what a person earns, while taxable income reflects deductions for various expenses.

25. Taxes W-4 Form Allows workers to make deductions to decrease taxes. It helps determine the amount of taxes withheld from an individual’s paycheck

26. Taxes Sales Taxes is based on how much items cost. – In VA its about 6% – PA there is no sales tax on clothing Sales tax is calculated by multiplying the price of an item by the tax rate Property taxes are based on how much a property is worth. – Land – Buildings

27. Taxes