Creating a budget

Creating a budget

Warm-Up Questions CPS Questions 1 – 2 Note for teacher: Use “Pick a Student” button in CPS Chapter 1, Lesson 1

Chapter Overview Lesson 1: Creating a Budget Lesson 2: Savings and Bank Accounts Lesson 3: Real-Life Issues in Buying and Selling Chapter 1, Lesson 1

Lesson Overview • The Components of a Personal Financial Plan • The Steps to Creating and Developing a Personal Financial Plan • The Elements of a Budget Chapter 1, Lesson 1

Quick Write Why do you think it is important for you to have a financial plan? Do you think a plan is just as important for someone who is wealthy as it is for someone who’s just getting by? Why or why not? Note for teacher: Use “Pick a Student” button in CPS Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Components of a Financial Plan • Finance - the management of money • Personal Finance - how you manage your money Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Advantages of a Personal Financial Plan • Make good financial decisions • Evaluate the opinions of financial advisers Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Creating a Personal Financial Plan • Managing your budget • Managing your liquidity • Financing Large Purchases • Protecting Your Assets • Investing for the Future • Investing in Your Retirement Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Managing Your Budget • Budget • Detailed summary of expected expenses and income • Income • Money coming in on a regular basis • Expenses • Money going out for needs and wants GOAL: Income > Expenses Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Managing Your Liquidity • Liquidity • Access to funds to cover a short-term cash need • Money needed to cover unexpected expenses Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Financing Your Large Purchases • Financing • Obtaining or providing money for a specific purpose • Generally comes in the form of loans • Interest • Charge on borrowed money • Compound Interest • Interest on accumulated unpaid interest Chapter 1, Lesson 1

Protecting Your Assets • Asset • Something of value that you own • Tangible assets are physical items • Assets may be protected with insurance • Insurance • An agreement between two parties • Premium or monthly fee Chapter 1, Lesson 1

Investing for the Future • Investment • Something you own that you expect to increase in value over time • Examples of investments: • Stocks • Bonds • Mutual Funds Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Investing in Your Retirement • Retirement • Period of life during which you no longer work full time • People typically retire once they qualify for Social Security • Military members may retire after 20 years of service • Start planning for retirement now Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Learning Check Questions CPS Questions 3 – 4 Note for teacher: Use “Pick a Student” button in CPS Chapter 1, Lesson 1

Activity 1: Financial Planning Process • On the worksheet provided, list the six steps in the financial planning process. • For each step, list an activity/task that you should accomplish. • Be prepared to share your answers with the class. Chapter 1, Lesson 1

Steps for Developing a Personal Financial Plan • Establish your financial goals: • How important is money to you? • What do you need money for? • Be realistic • Timing is important: • Short-term • Intermediate-term • Long-term Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Activity 2: Financial Goals • On the worksheet provided, identify 3-5 financial goals for each timeframe: • Short-term goals • Intermediate goals • Long-term goals • Be prepared to share your answers with the class. Chapter 1, Lesson 1

Steps for Developing a Personal Financial Plan (cont) • Your Current Financial Position • Present financial position impacts future decisions • Identify and Evaluate Alternative ways to Achieve Goals • Savings Account • Investments/Stocks Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Steps to Creating a Personal Financial Plan (cont) • Select the best plan • Should be a plan you can stick with • Evaluate your plan • Review it regularly to see how you’re doing • Revise your plan • Note where it’s worked and not worked Chapter 1, Lesson 1 Photo courtesy of Shutterstock

Activity 3: Smart Money Research • Use the internet to research smart money management techniques. • Focus on tips that help meet your financial goals. • Identify your top 5 tips for smart money management. • Be prepared to share your tips with the class. Chapter 1, Lesson 1

The Elements of a Budget • Income – money you receive regularly • Salary / Wages • Savings • Investments • Expense – money you spend • Clothing • Entertainment • Food • Car Graphic courtesy of Shutterstock Chapter 1, Lesson 1

Activity 4: Personal Budget Planning • Using the worksheet provided, create a three-month budget listing your expenses and income. • Is your budget balanced? Is your budget realistic? If not, revise it. • Be prepared to share your tips with the class. Chapter 1, Lesson 1

Summary • The Components of a Personal Financial Plan • The Steps to Creating and Developing a Personal Financial Plan • The Elements of a Budget Chapter 1, Lesson 1

Review Questions CPS Questions 11 – 12 Note for teacher: Use “Pick a Student” button in CPS Chapter 1, Lesson 1

Next… • Savings and banking accounts Graphic courtesy of Shutterstock Chapter 1, Lesson 1

Creating a budget