1. Budgeting, Saving and Spending
Personal Finance
Budgeting, Saving and Spending

2. Planning A good budget requires planning Four-step process:
1. Assess Needs
A) Evaluate your current financial situation.
B) Make two lists: a WANT list and a NEED list.
2. Set Goals 3. Make a Plan 4. Take Action

3. Get SMART A realistic goal is SMART
Specific - Smart goals are specific enough to suggest action.
Measurable - You need to know when you have achieved your goal, or how close you are.
Attainable - The steps toward reaching your goal need to be reasonable and possible.
Relevant - The goal needs to make common sense. You don't want to struggle or work toward a goal that doesn't fit your need.
Time-related - Set a definite target date.

4. Building a Budget
30%
Housing
18%
Transportation
16%
Food 8%
Miscellaneous 5%
Clothing
Medical
Recreation
Utilities 4%
Savings
Other Debts
This chart shows some rough guidelines on how much of your income should go toward different expenses.

5. Acquiring Income From jobs Parents/allowance Friends
Hourly wage X hours worked
Parents/allowance
Friends
Government/social assistance
Investment/interest
Child/spousal support
Stock market
Lottery/gambling

6. Expenses
Fixed expenses - occur regularly, and the amounts generally don’t fluctuate from month to month.
Flexible expenses – occur regularly but at varying amounts
Discretionary expenses - Discretionary expenses are those expenses you choose to incur.

7. Savings Saving is putting aside money for future use (investing)
Opposite of consuming (withdrawal)A savings plan is Systematic or regular way to reach a financial goal
Why save?
Emergency needs
Goals
Short term
Long term
Security & Future Needs

8. Investments Investments and “yield” Called “rate of return” (ROI)
Expressed as an annual % of original investment
Eg. $1,000 at 6%
interest Earns $60 in the first year Total investment now worth $1,060 (1, )

9. Interest on Investments
Simple Interest
Calculated only on principal initially invested
Eg. 5% Interest
Yr. 1 - $50, total investment $1,050 Interest
Yr. 2 - $50 , total investment $1,100 Interest
Yr. 3 - $50 , total investment $1,150 Etc.

10. Compound Interest Calculated on principal plus interest reinvested
Eg. 5%
Yr 1 $1, (1000*5%) = $1,050
Yr 2 $1, (1050*5%) = $1,102.50
Yr 3 $1, ( *5%) = $1,157.63
Comparison, Simple vs. Compound Interest After 3 years $1150 vs
The $7.63 represents interest on interest (compounding)
Calculation of Compound Interest:
Final Principal = Starting Principal X (1 + Interest Rate)Compounding Periods

11. Types of Savings Savings Accounts Term Deposits
Guaranteed Investment Certificates (GIC)
RRSP Registered retirement savings plan
RESP Registered Education Savings Plan

12. Saving
What are you saving for?

13. Emergencies You forget to lock your bike and someone steals it.
Your parents say that your carelessness is your problem.
You have to replace the bike.
If you don't have money, you're walking.

14. Common Expenses Clothes CDs Movies Pizza Christmas? Birthdays?
Where's all the money going to come from?
If you're smart, you've been saving for a couple of months just to get you through expensive times.

15. Future Purchases
You can dream about owning that CD burner or start saving for it now.
Ever want to own a car?
Where are you going to get spending money for college?
While cars and college may seem far off, they're only a few years away.

16. Investing
Any money you don’t spend on expenses can go towards investments
Investments then become another way of earning money if you are wise with your investments

17. How do you hang on to your cash so you don't just buy impulsively?

18. Buy it or Not?
You don't want to run out of your spending money before you get paid again.
Many adults moan about having more expenses per month than they have money
They're out of cash by the 21st and they don't get paid again until the 1st of the next month.

19. Resist impulse buying
Get into the habit of asking yourself questions before you buy.
Do I really need this item?
If I don't need it, do I at least really want it?
Am I sure that I'll use it? Wear it?
If I buy it now, will I have enough money for other things I might need later on — this week, this month, next month?
Will this purchase take money away from paying off any debts I might owe?

20. 6 ways to save Smart shoppers save while they spend.
Don't shop as entertainment.
Shop the sales.
Wait for the sale.
Shop at places other than the mall
Go to matinees and discount theaters
Check out purchases that perform tasks