1. Spending Plans Advanced Level

2. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Where’s My Dough? What expenses do you have? How much do you spend on each expense? Play dough = income Divide your play dough to show how much is spent on each expense Write a personal financial goal Based upon your current spending, is it realistic to achieve your goal? Adjust your play dough to reach your goal You have begun to develop a spending plan!

3. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona What is a Spending Plan? Spending Plan for: Time Period: Planned Amount Actual Amount Income Earned Income Wages or salary before deductions Unearned Income Money from savings and investments to help pay expenses during this time period Received Income from Government Programs Total Income$ $ Expenses Deductions Often Taken from Paychecks Contributions to retirement programs (401k, 403b, pension, IRA) Federal income tax and state income tax Social Security and Medicare Saving and Investing (Pay Yourself First) Contribution to savings and investments Insurance Premiums Health, automobile, home or renters, life Housing Costs Transportation Costs Food Costs Family Member Care Communication and Computers Telephone landline, cell phone, Internet, cable/satellite television Medical Costs Not Covered by Insurance Clothing and Personal Care Educational Expenses Pet Care Entertainment Gifts and Charitable Contributions Credit Costs Student loan, credit card, other loan payments Total Expenses$ $ Net Gain or Net Loss (Income less Expenses)$ $ An income and expense statement sometimes referred to as a budget which records both planned and actual income and expenses over a period of time A budget

4. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Why is a Spending Plan an important part of financial planning? Analyze the opportunity costs of your trade-offs to maximize financial well- being Helps set and reach goals Help manage your money in a positive manner Increase net worth

5. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Money Management Tools Statement of Financial Position Income & Expense Statement Spending Plan What is my financial position today? What is my future money management plan? How have I managed my money in the past? Make changes Determine what changes to make

6. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona A forward-looking Income and Expense Statement May use the same template for both the Income and Expense Statement and the Spending Plan

7. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Spending Plan Development Process Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments Develop the spending plan Maintain the spending plan

8. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Track Current Income and Expenses Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments Ensures spending plan is realistic

9. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Personalize Your Spending Plan Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments How will you develop a spending plan? What is the intended time period for your spending plan? What categories will your spending plan include?

10. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona How will you develop a spending plan? How would you develop a spending plan? Paper and pencil Spreadsheet Money management computer software Applications

11. 2.2.5.G1 © Take Charge Today – August 2013– Spending Plans – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona What is the intended time period for your spending plan? What categories will your spending plan include? Usually concurrent with pay period Reference tracking from the Income and Expense Statement Do any categories need added, changed, or removed? What time period would you choose for your spending plan?

12. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Allocate Money to Each Category Reference tracking from Step One Determine what changes to make Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments

13. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona When allocating money consider: ContractualNon-contractual Trade-offs and opportunity costs Goals Contractual expenses Required to pay expense for a specific amount of time - not easy to reduce or eliminate Easy to reduce or eliminate Rent, Internet, Cell phone Food, entertainment

14. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Spending Plan Guide What variables may cause these percentages to be different?

15. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Net Gain or Net Loss? Net Gain?Net Loss? Add more money to savings or another expense Increase income Decrease expenses Both

16. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Implement and Control Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments Use a control system to stay on track

17. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Control Systems Which control system would help you stick to your spending plan? Internet-based spending plan program Depository institution programs Check register system Envelope system

18. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Evaluate and Make Adjustments Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments Is your spending plan helping you reach goals? Do you need to make any adjustments?

19. 2.2.5.G1 © Take Charge Today – August 2013 – Spending Plans – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona Summary A spending plan is an important financial planning tool ▫ Helps achieve goals Make your spending plan work for you Make sure to control, evaluate, and adjust your spending plan Step 1 - Track Current Income and Expense Step 2 - Personalize Your Spending Plan Step 3 - Allocate Money to Each Category Step 4 - Implement and Control Step 5 - Evaluate and Make Adjustments