1. Budgeting and Financial Priorities
Budgeting and Establishing Financial Priorities
Budgeting and Financial Priorities

2. Budgeting and Financial Priorities
The PICPA
Pennsylvania Institute of Certified Public Accountants
The PICPA is a professional association of more than 22,000 members working together to improve the profession and serve the public interest.
Budgeting and Financial Priorities

3. Financial Planning Process
Identify your values and goals
Develop a strategy to achieve those goals
Consider you current finances, risk tolerance, and time horizons
Analyze all the factors that may arise while you try to meet your goals
Budgeting and Financial Priorities

4. Prioritize Your Money What are your needs? What are your wants?
*Imagine you are financially secure and have more than enough money to take care of your needs – now and in the future.
How would you live your life?
What would you do with your money?
Describe a life that is complete and fulfilling.
*Developed by George Kinder and the Kinder Institute of Life Planning
Budgeting and Financial Priorities

5. Possible First Priorities
Shelter
Apartment or house
Transportation
Car or public transportation
Health insurance
Food and clothing
College education
Budgeting and Financial Priorities

6. Possible Second Priorities
Budgeting and debt management
Creating an emergency fund
Saving for a vacation
Saving for a big-ticket item (e.g., a large screen TV)
Budgeting and Financial Priorities

7. Budgeting and Financial Priorities
Goal in Budgeting
Income less expenses equals positive cash flow
Positive cash flow can be used for:
A financial cushion
Debt repayment
Guilt-free indulgences
Charitable endeavors
Budgeting and Financial Priorities

8. Budgeting and Financial Priorities
Budgeting Basics
Assess yourself:
What is working?
Where can I improve?
Where am I today, and where do I want to be in the future?
Budgeting and Financial Priorities

9. Budgeting and Financial Priorities
Concentrate on wealth accumulation
How much you earn has almost no bearing on whether or not you will build wealth and meet your financial goals.
It doesn’t matter how much you make, it matters how much you spend.
Budgeting and Financial Priorities

10. Recurring Fixed Expenses
Expenses that generally do not keep us from saving more. They are easily tracked and the amount can usually be predicted.
Not necessarily “mandatory” expenses
Budgeting and Financial Priorities

11. Discretionary Expenses
Not as predictable but much more manageable in terms of reducing spending and implementing budgeting guidelines for yourself and your family.
Budgeting and Financial Priorities

12. Budgeting and Financial Priorities
Unexpected Expenses
Why a cushion in your budget is needed
Set aside some of your earnings for the unexpected things that come up in life:
Loss of a job
Car accident
Severe health problem
Set up a separate savings account for your emergency fund.
Budgeting and Financial Priorities

13. Balancing Debt and Savings
Don’t wait until your debt is paid off to start saving!
Determine how much potential positive cash flow you have available, and allocate between debt repayment and savings.
Budgeting and Financial Priorities

14. Budgeting and Financial Priorities
Emergency Savings
In your savings fund you should have at least enough money to cover three months of expenses.
Keep the savings liquid.
Cash savings accounting
Money market
Budgeting and Financial Priorities

15. Saving Priority Examples
Long-term goal: retirement accounts, saving for college
Short-term goal: vacation, home improvements, car purchase
Plan ahead for the next few years
Budgeting and Financial Priorities

16. Budgeting and Financial Priorities
Savings Tips
Pay cash instead of credit—this makes the money you’re spending more tangible.
Never spend more than $100 (for example) without taking 48 hours to think about it. This will help with impulsive spending.
Budgeting and Financial Priorities

17. Budgeting and Financial Priorities
Take Action
Decide how much to allocate to savings and debt repayment goals.
Set up savings and debt payments automatically.
Payroll deductions directly to checking and savings accounts
Automatic banking payments
Automatic transfers
Budgeting and Financial Priorities

18. Budgeting and Financial Priorities
Take Action
Other things won’t get in the way if the plan has been systemized.
If you wait to save what’s “left over” after spending, nothing will be there.
Pay yourself (your goals) first every month, before expenses start to add up.
Track all spending in a software program (Microsoft Excel spreadsheet, Quicken, etc.)
Budgeting and Financial Priorities

19. Budgeting and Financial Priorities
Questions?
Budgeting and Financial Priorities