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Introduction to Business and Technology

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1 Introduction to Business and Technology
Budgeting and Finance Introduction to Business and Technology

2 Describe situations that may occur as a result of poor budgeting.
Bell Ringer: Describe situations that may occur as a result of poor budgeting. Be prepared to share your answers with the class

3 GPS Focus Standards BCS-BE-26: The student explains the process in developing a budget. BCS-BE-27: The student analyzes the financial statements of a business and utilizes those statements to make important business decisions. BCS-BE-28: The student identifies financial aspects associated with opening a business. BCS-BE-29: The student completes records which are fundamental for any business.

4 Essentials Questions How can a budget increase your profits?
What documents do you need to make wise decisions concerning the financial health of your business? How much does it cost to open a business? from where do those numbers come? Why are your bank records and credit report so important? How do you maintain a good credit score?

5 Budgeting Techniques Lesson Objectives:
Identify the purpose of a budget Describe steps for preparing a budget Describe characteristics of a successful budget

6 Budget A plan for managing income and expenses over a certain period of time.

7 Purpose of Budgets Live within your income.
Make wise buying decisions. Avoid credit problems. Plan for financial emergencies. Develop money management skills Achieve your financial goals.

8 The Budget Process Set Financial goals - What do you want to achieve?
Plan Budget Categories Maintain financial records Evaluate your budget

9 1. Set Financial GOALS: (Affect what we spend our $$ on!)
Short-Term Goals Long-Term Goals SMART Approach

10 SMART Approach

11 SMART Goal Example I will save $100/month for 18 months from my part-time job to purchase a car by July 31, 2014. Specific-purchase a car Measurable-$100/month Action-oriented-I will save Realistic-from my part-time job Time-based-July 31, 2014

12 2. Plan Budget Categories
Income Paycheck Allowance Scholarships Borrowed Money Revenue Savings Expenses Needs Wants

13 Two Types of Expenses Fixed Variable

14 Fixed Expenses Rent Mortgage payments Insurance premiums
Costs that occur on a regular basis and are the same amount each time Rent Mortgage payments Insurance premiums

15 Variable Expenses Food Clothing
Costs that differ each time and may not be as easy to estimate Food Clothing Utilities i.e., telephone, electricity, water

16 Personal Budget Categories
Savings Food Clothing Household Transportation Health and personal care Recreation and Education Gifts and contributions

17 Allowance The amount of money you plan to use for a certain budget category

18 3. Maintain financial records
Record income and expense checkbooks, bank statement Prepare an income and expense summary spreadsheets, budgeting software

19 4. Evaluate Your Budget Budget variance - difference between actual spending and budgeted amount Deficit - Actual spending is greater than budgeted amount Surplus - Actual spending is less than budgeted amount

20 Characteristics of an Effective Budget
Realistic – reflect current income and planned spending Flexible – adaptable to unexpected expenses Regular evaluation – every few months Well planned and clearly communicated – involve all family members Simple format – user friendly

21 Review Questions Which of the following is an example of a fixed cost?
clothing accessories car payment entertainment

22 Review Questions 2. Which of the follow is an example of a variable cost? rent insurance premiums water bill mortgage payment

23 Review Questions A major purpose of a budget is to:
assist with comparison shopping achieve financial goals reduce a person’s enjoyment of life d. gather data for using credit cards

24 Review Questions 4.The most uncertain aspect of the budgeting process involves: estimating variable expense determining net worth estimating fixed expense d. setting financial goals

25 Review Questions 5.The following is a characteristic of an effective budget: should be written in ink limited to one page should not change d. should be evaluated regularly

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