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Chapter 8

Chapter 8. Budgets. Budget s. A budget is a spending and saving plan based on your expected income and expenses. A budget helps you plan your spending and saving so that you won’t have to borrow money or use credit to meet your daily needs. What is a Balanced Budget?.

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Chapter 8

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  1. Chapter 8 Budgets

  2. Budgets A budget is a spending and saving plan based on your expected income and expenses. A budget helps you plan your spending and saving so that you won’t have to borrow money or use credit to meet your daily needs.

  3. What is a Balanced Budget? • When your Budget’s Income EQUALS the total Outgo • Does not mean you spend ALL of your money • Savings is considered part of your OUTGO

  4. Steps in Preparing a Budget Estimate your income. Estimate your expenses. Decide how much to save. Balance your budget.

  5. Parts of a Budget • Four Main Parts to a Budget: • Income • Includes Money from ALL sources of income • Fixed Expenses • Expenses whose amounts remain relatively constant • Variable Expenses • Expenses whose amounts change; Depend on how much you use them • Budget Difference • How much money you have left over (Surplus) • OR How much money you have overspent (Deficit)

  6. Monthly Budget Expenses Fixed expenses are costs that generally do not change from month to month. Variable expenses are costs that vary in amount and type, depending on the choices you make.

  7. Budget Formula Income-Fixed Expenses -Variable Expenses -Savings =Budget Difference (Should = Zero to balance)

  8. Simple Budget The budget balances.

  9. Net Worth Statement • A net worth statement shows a person’s net worth based on his or her assets and liabilities. • Assets are items of value that a person owns. • Money or debts you owe to others are called liabilities. • When you subtract your liabilities from your assets, the difference is known as net worth. Assets – Liabilities = Net worth Chapter 8

  10. These two numbers must be the same. Net Worth Statement Chapter 8

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