1. Budgeting September 13, 2010 Bus 12 – Money Matters R. Okumoto

2. Topics Today Bus 12 – Money Matters R. Okumoto  What is Budgeting ?  What is Financial Planning ?  How do you Measure your Financial Health ?  How do you keep track of Paperwork ?  What are the Basic Money Math Formulas ?

3.  Budgeting = Short term forecast of income & spending (monthly or weekly)  Financial Planning = Long term forecast of income & spending (Multiple Years) (Typically includes savings & investment planning) (Typically includes major life event planning: marriage, kids, homes, retirement) What is Budgeting ? Bus 12 – Money Matters R. Okumoto

4.  Budgeting = Short term forecast of income & spending (monthly or weekly)  Financial Planning = Long term forecast of income & spending (Multiple Years) (Typically includes savings & investment planning) (Typically includes major life event planning: marriage, kids, homes, retirement) What is Financial Planning ? Bus 12 – Money Matters R. Okumoto

5. Who Budgets? - Government Bus 12 – Money Matters R. Okumoto

6. Who Budgets? - Business Bus 12 – Money Matters R. Okumoto

7. Who Budgets? - Schools Bus 12 – Money Matters R. Okumoto

8. Who Budgets? - Movies Bus 12 – Money Matters R. Okumoto

9. Who Budgets? - YOU Bus 12 – Money Matters R. Okumoto

10.  Budgeting enables you to manage your money  Budgeting structures your spending  Budgeting provides a structure to analyze your spending  Budgeting is a tool to help you achieve your financial goals  It also serves as a back up in case something happens to you So…Why Budget ? Bus 12 – Money Matters R. Okumoto

11.  Budgeting enables you to manage your money  Budgeting structures your spending  Budgeting provides a structure to analyze your spending  Budgeting is a tool to help you achieve your financial goals  It also serves as a back up in case something happens to you So…Why Budget ? Bus 12 – Money Matters R. Okumoto

12.  Budgeting enables you to manage your money  Budgeting structures your spending  Budgeting provides a structure to analyze your spending  Budgeting is a tool to help you achieve your financial goals  It also serves as a back up in case something happens to you So…Why Budget ? Bus 12 – Money Matters R. Okumoto

13.  Budgeting enables you to manage your money  Budgeting structures your spending  Budgeting provides a structure to analyze your spending  Budgeting is a tool to help you achieve your financial goals  It also serves as a back up in case something happens to you So…Why Budget ? Bus 12 – Money Matters R. Okumoto

14.  Budgeting enables you to manage your money  Budgeting structures your spending  Budgeting provides a structure to analyze your spending  Budgeting is a tool to help you achieve your financial goals  It also serves as a back up in case something happens to you So…Why Budget ? Bus 12 – Money Matters R. Okumoto

15.  To ensure that:  You will incur minimal Financial Crises  You will likely survive any Financial Crises Why do all this? Bus 12 – Money Matters R. Okumoto

16.  Start with a Goal  Build the Plan  Track Spending – start with Major items  Categorize Spending  Pay yourself First  Be Flexible  Use free tools and assistance  Review and improve: trial & error How to Budget (The Process) Bus 12 – Money Matters R. Okumoto 2

17.  Start with a Goal  Build the Plan  Track Spending – start with Major items  Categorize Spending  Pay yourself First  Be Flexible  Use free tools and assistance  Review and improve: trial & error How to Budget (The Process) Bus 12 – Money Matters R. Okumoto

18.  Start with a Goal  Build the Plan  Track Spending – start with Major items  Categorize Spending  Pay yourself First  Be Flexible  Use free tools and assistance  Review and improve: trial & error How to Budget (The Process) Bus 12 – Money Matters R. Okumoto

19.  Start with a Goal  Build the Plan  Track Spending – start with Major items  Categorize Spending  Pay yourself First  Be Flexible  Use free tools and assistance  Review and improve: trial & error How to Budget (The Process) Bus 12 – Money Matters R. Okumoto

20.  Start with a Goal  Build the Plan  Track Spending – start with Major items  Categorize Spending  Pay yourself First  Be Flexible  Use free tools and assistance  Review and improve: trial & error How to Budget (The Process) Bus 12 – Money Matters R. Okumoto

21.  Start with a Goal  Build the Plan  Track Spending – start with Major items  Categorize Spending  Pay yourself First  Be Flexible  Use free tools and assistance  Review and improve: trial & error How to Budget (The Process) Bus 12 – Money Matters R. Okumoto

22.  Start with a Goal  Build the Plan  Track Spending – start with Major items  Categorize Spending  Pay yourself First  Be Flexible  Use free tools and assistance  Review and improve: trial & error How to Budget (The Process) Bus 12 – Money Matters R. Okumoto

23.  Start with a Goal  Build the Plan  Track Spending – start with Major items  Categorize Spending  Pay yourself First  Be Flexible  Use free tools and assistance  Review and improve: trial & error How to Budget (The Process) Bus 12 – Money Matters R. Okumoto 3

24.  Use free tools and assistance Quicken OnlineQuicken Online - Recently became free of charge. Tracks your spending and categorizes it automatically. SimpleDSimpleD - An “open source Windows application designed for personal or household financial management.” The screenshots actually look pretty slick. AceMoney LiteAceMoney Lite - Freeware version of an offline personal finance management program. It even downloads stock quotes from the internet. PearBudgetPearBudget - An Excel spreadsheet that has definitely had a lot of time put into it. It’s a bit busy. How to Budget (The Process) Bus 12 – Money Matters R. Okumoto

25.  Use free tools and assistance BuddiBuddi - An open-source personal finance and budgeting program, which will run on any machine with Java installed. Mo.neytrack.inMo.neytrack.in - A “free online webapp that allows you to track all your expenses and income.” GrisbiGrisbi - Another offline open-source personal finance app. Budget MasterBudget Master - A free personal budgeting program that offers charts and visual reports Microsoft Office Accounting Express 2007Microsoft Office Accounting Express 2007 - Seems targeted at business, so this may be overkill for home budgets. But it’s free! How to Budget (The Process) Bus 12 – Money Matters R. Okumoto

26. How to Budget (Example) INCOME / EXPENSE ITEMSJANFEBMAR Income – Wages (net of taxes) Income – Investments $ 1,200 1,400 $ 1,200 1,200 $ 1,200 900 Net Income $ 2,600 $ 2,400 $ 1,900 Expenses: Fixed – Rent Expenses: Fixed – Car Payment Expenses: Fixed – SJSU Tuition $ 500 300 0 $ 500 300 1,200 $ 500 300 0 Expenses: Variable – Food Expenses: Variable – Cell Phone Expenses: Variable – Utilities Expenses: Variable – Credit Card Expenses: Variable – Gas Expenses: Variable - Entertainment Expenses: Variable – Pay yourself 200 50 300 100 200 100 200 50 300 100 200 100 200 50 300 100 200 100 Total Expenses $ 1,800 $ 3, 000 $ 1,800 Surplus / (Deficit) $ 800 ($ 600) $ 100 Bus 12 – Money Matters R. Okumoto

27. How to Budget (Example) INCOME / EXPENSE ITEMSJANFEBMAR Income – Wages (net of taxes) Income – Investments $ 1,200 1,400 $ 1,200 1,200 $ 1,200 900 Net Income $ 2,600 $ 2,400 $ 1,900 Expenses: Fixed – Rent Expenses: Fixed – Car Payment Expenses: Fixed – SJSU Tuition $ 500 300 0 $ 500 300 1,200 $ 500 300 0 Expenses: Variable – Food Expenses: Variable – Cell Phone Expenses: Variable – Utilities Expenses: Variable – Credit Card Expenses: Variable – Gas Expenses: Variable - Entertainment Expenses: Variable – Pay yourself 200 50 300 100 200 100 200 50 300 100 200 100 200 50 300 100 200 100 Total Expenses $ 1,800 $ 3, 000 $ 1,800 Surplus / (Deficit) $ 800 ($ 600) $ 100 Bus 12 – Money Matters R. Okumoto

28. How to Budget (Example) INCOME / EXPENSE ITEMSJANFEBMAR Income – Wages (net of taxes) Income – Investments $ 1,200 1,400 $ 1,200 1,200 $ 1,200 900 Net Income $ 2,600 $ 2,400 $ 1,900 Expenses: Fixed – Rent Expenses: Fixed – Car Payment Expenses: Fixed – SJSU Tuition $ 500 300 0 $ 500 300 1,200 $ 500 300 0 Expenses: Variable – Food Expenses: Variable – Cell Phone Expenses: Variable – Utilities Expenses: Variable – Credit Card Expenses: Variable – Gas Expenses: Variable - Entertainment Expenses: Variable – Pay yourself 200 50 300 100 200 100 200 50 300 100 200 100 200 50 300 100 200 100 Total Expenses $ 1,800 $ 3, 000 $ 1,800 Surplus / (Deficit) $ 800 ($ 600) $ 100 Bus 12 – Money Matters R. Okumoto

29. How to Budget (Example) INCOME / EXPENSE ITEMSJANFEBMAR Income – Student Aid Income – Part time Job (net pay) $ 1,200 1,400 $ 1,200 1,200 $ 1,200 900 Net Income $ 2,600 $ 2,400 $ 1,900 Expenses: Fixed – Rent Expenses: Fixed – Car Payment Expenses: Fixed – SJSU Tuition $ 500 300 0 $ 500 300 1,200 $ 500 300 0 Expenses: Variable – Food Expenses: Variable – Cell Phone Expenses: Variable – Utilities Expenses: Variable – Credit Card Expenses: Variable – Gas Expenses: Variable - Entertainment Expenses: Variable – Pay yourself 200 50 300 100 200 100 200 50 300 100 200 100 200 50 300 100 200 100 Total Expenses $ 1,800 $ 3, 000 $ 1,800 Surplus / (Deficit) $ 800 ($ 600) $ 100 Bus 12 – Money Matters R. Okumoto

30.  What is Savings or Cash Surplus? (BMM – When Income is greater than Expenses) Savings Bus 12 – Money Matters R. Okumoto

31.  Start with a Goal  Build the Plan  Track Spending – start with Major items  Categorize Spending  Pay yourself First  Be Flexible  Use free tools and assistance  Review and improve: trial & error How to Budget (Process Review) Bus 12 – Money Matters R. Okumoto

32.  The Equation of Personal Net Worth: (BMM) (Assets – Debt = Personal Net Worth) How to Measure your Financial Health (Personal Wealth) Bus 12 – Money Matters R. Okumoto 4

33. How to Measure your Wealth AssetsValue Checking Account Savings Account Bonds Car ( 2009 – Ferrari Modena – RED ) House ( 3,000 SF custom home in the Los Altos Hills) $ 1,000 500 300 175,000 4,000,000 Total Assets $ 4,176,800 Debts Credit Cards Car Loan Mortgage $ 96,000 170,000 3,900,000 Total Debt $ 4,166,000 Net Worth $ 10,800 Net Worth Mr. “All for Show” Bus 12 – Money Matters R. Okumoto

34. How to Measure your Wealth AssetsValue Checking Account Money Market Account Stocks & Bonds Car ( 2006 Toyota Prius - RED ) House ( 1,700 SF City Condo – with a view) $ 1,000 30,000 450,000 28,000 600,000 Total Assets $ 1,109,000 Debts Credit Cards Car Loan Mortgage $ 0 0 63,000 Total Debt $ 63,000 Net Worth $ 1,046,000 Net Worth Ms. “Millionaire” Bus 12 – Money Matters R. Okumoto

35. Topics Today Bus 12 – Money Matters R. Okumoto  What is Budgeting ?  What is Financial Planning ?  How do you Measure your Financial Health ?  How do you keep track of Paperwork ?  What are the Basic Money Math Formulas ?