1. Spending Plans

2. What is a spending plan?
A tool used to record and track projected and actual income and expenses over a period of time.
Also called a budget.

3. Spending Plans
Are simply road maps the help people reach financial goals
Need to be flexible to change with various life stages
Are not difficult to establish but do take time and commitment.
**Recommended to track spending prior to creating a budget.
NOTE: There should not be any money left over in a budget. If there is, it should be put into the savings or charitable giving column.

4. Benefits of Spending Plans
A spending plan can help you:
Put aside money for savings goals
Prepare for regular expenses
Prepare for unexpected expenses
Control how you spend money
Reduce stress and increase confidence
Provide an excuse to calm excessive spending
Reasons to budget are numerous:
To determine how much money you have to spend
To decide how you want to spend your money
To determine how to spend money in the future
To learn to live on less than available income
To stay out of financial trouble

5. Consequences of NOT Using a Spending Plan
No idea where money has been spent
Bad spending habits are unidentified
Unprepared for emergencies
Strained relationships
Lack of savings plan
Wasted money
Stress

6. Opportunity Cost of Spending Plans
Consumers may feel like having a budget is confining or restrictive, but it actually gives them more freedom and more options.
By paying attention to where money is spend, wiser choices can be made.
With more freedom, more options, wiser choices, more money can be spent on items of value.

7. Before creating a spending plan…
Track your spending.
Before making a budget, spend a couple of weeks writing down every penny you spend.
This will help you have a better idea of where your dollar amounts should be when making a budget.

8. How do I make a spending plan?
Assess your personal financial situation (needs, values, life situation).
Set personal and financial goals.
Create a budget for fixed and variable expenses based on projected income.
Monitor current spending (saving, investing) patterns.
Compare your budget to what you actually spent.
Review financial progress and revise budget amounts.
Building a budget takes a little time. But it’s absolutely vital to financial health.
Track your expenses for a month to start a budget. What did you buy? What bills did you pay? Basically, where did your money go? Then categorize your spending into groups such as clothing, food, music downloads, auto, etc. Think of other areas in which you might spend money on a regular basis. Don’t forget to include some money for savings.
Identify your income. Only include regular sources of income such as paychecks and allowances. If you get paid monthly or semi-monthly, it is easy to calculate your monthly income. If you get paid weekly or biweekly, multiply your weekly income by 52 or 26 respectively to get your annual salary. Then divide by 12 to get your monthly income. Now that you have your expenses and income quantified, it’s time to examine and fine-tune your budget.
Subtract expenses from income. This is to determine how much money you have left over at the end of the month. If you have more income than expenses, that’s good. If you spend more money than you earn, you’re going to have to decrease your expenses or increase your income. Keep in mind it’s easier to decrease your expenses.
Timing is important. If you get paid once a month, be sure to budget money to last the whole month. If you get paid twice a month, but you have several large expenses at the beginning of the month, make sure you save some of your money from the end of the month to help with the next month’s bills.
Be prepared for new financial situations. When something changes, some part of your income or your expenses, you’ll know how it affects your overall financial picture, and what you need to do to cope with the changes.
Maintain your budget. Each month be sure to compare your actual spending with your budget. If you consistently spend more or less than your budgeted amount in any category, update your budget to reflect reality. An inaccurate budget can do more harm than good.
From PracticalMoneySkills.com

9. Earned income
Money generated from employment or retirement funds.
Unearned income
Money received for no exchange, such as a gift.
Sample
Pay Yourself First®
The idea that savings should be a regular part of a spending plan and should happen before variable expenses.
Fixed expenses
Occur every period and are typically about the same amount.
Variable expenses
May or may not occur every period and do not have a constant value. 

10. More expenses than income?
Negative cash flow
Negative cash flow typically results in debt.
Part of being financially independent is spending less than you earn.

11. To Reduce Negative Cash Flow:
Reduce Spending
Doing comparison shopping
Using coupons
Avoiding impulse purchases
Buying items “on sale”
Carpooling, walking, or riding a bike
Eating at home
Eliminating/reducing impulse purchases – vending machines, convenience stores, etc.
Shopping at thrift stores
Wearing hand-me-down clothes
Using “frequent shopper” cards

12. To Reduce Negative Cash Flow:
Increase Income
After school/weekend job
Additional chores around the house
Yard work
Babysitting
Summer job
Dogwalking
Housesitting
Garage sale
Provide a service

13. Guidelines for a Budget
Housing & Utilities 30%
Food & Household 20%
Clothing & Personal 10%
Transportation 10%
Saving & Investing 10%
Miscellaneous 20%

14. What tools help in budgeting?
Envelope System
Computer Programs
Paper Tracking

15. Envelope System Each envelope is labeled for the category of spending.
Each pay period, a pre determined amount of money is placed in each envelope for each category.
Each time money is spent from an envelope, the transaction details (date, vendor, amount, etc.) is recorded on the outside of the envelope.
When the envelope is empty, spending ceases!

16. Computer Program
Inform students that there are computer programs available to manage spending and income.

17. RECONCILE Reconcile this. Fee 5 00 679 23 215 45 29 218 64 75 110 04
RECONCILE
Reconcile this.

18. Paper Tracking
Always record transactions in a check register or on the outside of the envelope for each category.

19. REMEMBER!!!
It is important to remember that budgets can and should change from time to time.
After following a budget for a month, re-evaluate it and make changes as necessary.

20. Large purchases
When adjusting a budget, consider future large purchases and consider saving up for that item and paying cash for it.
When a home or automobile is purchased, other budget categories, such as entertainment and clothes, may need to be cut back in order to compensate for the larger purchase.

21. Review
Financial independence is achieved by reducing spending, earning more, saving more, and avoiding negative cash flow.
A spending plan is a tool to assist one in tracking and monitoring income and expenses and avoiding negative cash flow.