2. Budgeting Techniques Key Terms --Budget --Fixed Expenses --Allowance --Budget Variance

3. What Is A Budget? A budget allows you to meet your personal goals with a system of saving and wise spending

4. The Main Purposes of a Budget Live Within Your Income Achieve Your Financial Goals Buy Wisely Avoid Credit Problems Plan For Financial Emergencies Develop Good Money Management Skills

5. Different Budgets For Different People Paper and Pencil Software Programs (Quicken) General Ledger Customize to Fit Your Lifestyle

6. The Four Step Budget Process Setting Financial Goals Planning Budget Categories Maintaining Financial Records Evaluating Your Budget

7. Setting Financial Goals Financial goals help you decide where you would like to be financially and develop your budget accordingly --Identify Short-Term Goals -Car --Identify Long-Term Goals -College / Institution of Higher Learning

8. Gross Income vs. Net Income Net Income (Take Home Pay)— the amount received after taxes and other deductions have been subtracted from your total earnings Gross Income—the actual amount of income received before any taxes are subtracted from your total earnings

9. Planning Budget Categories Fixed Expenses— costs that occur regularly and are for the same amount each time -- Rent / Mortgage Payments -- Insurance Premiums --Car Loan Payments -- Utility Bills

10. Planning Budget Categories Variable Expenses— living costs involving differing amounts each time and are usually more difficult to estimate than fixed costs -- Food -- Clothing -- Utilities (Telephone) -- Medical Expenses (Dentist)

11. Planning Budget Categories Savings— amount set aside for future goals or emergencies ALWAYS SAVE 10% OF YOUR NET PAY

12. Planning Budget Categories Allowance—the amount of money you plan to use for a certain budget category --$1,120 Home Mortgage Payment --$400 Car Payment --$200 Diapers / Formula --$105 Digital Cable --$150 Vehicle Gas Expense

13. Planning Budget Categories Savings— savings accounts, government bonds, stocks, and other investments Food— eating out / grocery shopping Clothing— shoes, dry cleaning, sewing supplies and repairs Household— rent, mortgage payments, taxes, insurance, gas, electricity, telephone, household supplies Transportation— automobile payments, insurance, automobile upkeep and operating costs, auto and drivers’ licenses Health and Personal Care— medical and dental expenses, medications, eyeglasses, hospital expenses, children’s allowances Recreation and Education— books, magazines, newspapers, concerts, vacations, school expenses, hobbies, radio, television, computer software, club dues Gifts and Contributions— donations to church, personal gifts

14. How Much Should I Set Aside For Each Category? What is your income What is your family size What are the ages of your children What is the current cost of living in your area What are your work related expenses What are your Goals (Short and Long Term)

15. Evaluating Your Budget Budget Variance— the difference between the actual spending category and the budgeted amounts category -- Deficit occurs when actual spending is greater than planned spending --Surplus occurs when actual spending is less than planned spending

16. Evaluating Your Budget A variance in the actual amount spent and the budgeted amount does not automatically mean a change in your spending plan is necessary Your budgeted amount may still be appropriate with a slight deficit or surplus occurring every couple of months in certain categories **CAR EXPENSES **HOME EXPENSES

17. Characteristics Of A Successful Budget Must Be Realistic— it should reflect your current income and planned spending Should Be Flexible— when unexpected expenses arise, your spending plan should be able to handle these living costs Should Be Evaluated Regularly— every few months, an individual or family should evaluate the budget to determine if it still is appropriate

18. Characteristics Of A Successful Budget Planned and Clearly Communicated— all members of a family should discuss financial goals, wants and needs, and plans for spending. In addition, the best spending plan should be written so that all affected by it can review its components Should Be Simple— if it is too detailed and difficult to understand, family members may not be willing to use the spending plan

19. Review Questions What percent should you plan to save? What category do you take savings from? The amount budgeted for savings and other expenditures is called? What is a budget deficit?