Unit 2 - Budgeting: Making the Most of Your Money

1. Did you Know? In 2001, the average American teen spent $104 per week. Unit 2 - Budgeting: Making the Most of Your Money

2. NEFE High School Financial Planning Program ? Unit Two – Budgeting: Making the Most of Your Money

3. Assignment • Part1 – Pie Chart • Using your recently created Spending Log, create categories of expenses and calculate the percent you spent on each category • Use that information to create a pie chart that represents how you spent your money • Answer questions on handout • Part 2 – Values and Spending

4. Reasons for a Spending Plan • …Helps you determine where you are spending your money currently. • …Helps you decide where to spend your money in the future. • …You have an organized way to save for things that cost more. • …Puts you in control of your financial future, beginning NOW.

5. Knowing How Much You Spend • Helps you create a BUDGET • What is a Budget? • A plan for managing your money during a given period of time • Income - Expenses

6. Income • Any money you receive • Where do most teens get their money? • 62% part-time employment, summer job, or neighborhood jobs (i.e. babysitting)

7. Your Paycheck • If you earn $12.00/hour and work for 40 hours a week, how much money will you take home? • Expect at least 20% to be taken out for taxes! Medicare Federal Income Tax State Income Tax Social Security

8. Taxes • Federal and State Income Taxes – fees collected by the federal/state government to support its programs; sent to the IRS/state revenue department • Social Security – provides a small income and other services to the elderly • Medicare – provides medical insurance to the elderly

9. Income • Gross Income • Total amount of income from your wages, before any payroll deductions taken out • # of hours worked x rate per hour • Net Income • Gross Income – taxes or other deductions • Take-home pay

10. Sample Paycheck

11. Expenses • What you spend money on; your needs and wants • 3 main types of expenses: • Fixed • Variable • Periodic or Occasional

12. Expenses • Fixed - costs the same amount every time • Rent, Car Payment, Cable bill, etc. • Variable – fluctuate in amount; usually have more control over how much they’ll be • Food, Electric bill, etc. • Periodic or Occasional expenses – you don’t pay every month, and can be either fixed or variable • Car Insurance due every 6 months • Auto repairs

13. The Most Important Expense • P.Y.F. – Pay Yourself First! • Saving is an all-important part of reaching your financial goals • Whenever you receive money, you should immediately put a certain amount into an account that you will set aside to use later to meet a long-term financial goal

14. Sample Budget

15. Top 10 Budgeting Tips 1. You need a budget, even if you don’t want one. • Budgets are the most practical way to regain control of your finances. They take some work and disciple, but they pay off in spades. 2. You can make a budget in 3 steps. • Keep track of your current spending for a time, categorize and total your spending, and then track it to make sure it doesn’t exceed the limits you impose.

16. Top 10 Budgeting Tips 3. Be careful with cash • If you find that you have no idea where your cash is going after you visit the ATM, consider tracking cash spending better. 4. Live within your means • It may seem simple, but don’t spend more than you make

17. Top 10 Budgeting Tips 5. Understand the difference between a want & a need • Sometimes the things we think we “need” are better classified as luxuries. ie) drinking a mocha latte every morning when you could brew coffee at home. 6. Take 10% off the top. Pay yourself first. • Every paycheck, put 10% aside for you. This way, you will never spend more than 90% of your income.

18. Top 10 Budgeting Tips 7. Let your computer do the work. • There are great software programs out there to make budgeting less of a chore. 8. Don’t obsess. • Focus on the big picture.

19. Top 10 Budgeting Tips 9. Don’t count your eggs before they’re hatched. • Windfalls are nice, but you can’t depend on them. Big tax refunds, end-of-year bonuses, or investment returns are not guaranteed. 10. Don’t let your spending creep up. • As you make more money, don’t spend more.

20. National Lampoons Christmas Vacation

21. People Without a Budget… • …Are less likely to know what they have. • …Have no plan, often coming up short before their next paycheck or allowance. • …Are almost certain to have no plan to save for more expensive spending goals.

22. Questions • Does it makes sense to create and live within a budget when you don’t have a lot of money? • What if you find that you are consistently spending more in one area than you had planned to? • What if you find that you can’t live within your budget?