Managing Spending: Budgeting and Consumer Rights

2. Part 6—Managing Your Income Chapter 24 Managing Spending

3. Chapter Objectives • Prepare a budget to help you manage your money wisely. • Identifyand use reliable sources of consumer information. • Explain the methods businesses use to promote goods and services. • Makedecisions about where and how to shop. • Describe your consumer rights and responsibilities. • Explain how your consumer rights are protected. • Demonstrate ways to avoid consumer fraud.

4. Key Concepts • A budget helps you manage your income and expenses. • Consumer resources are available to help you make wise shopping choices. • As a consumer, you have certain rights and responsibilities. • You can take steps to protect yourself from becoming a victim of consumer fraud.

5. Budgeting Your Money • Budget: A written plan to help you make the most of the money you have. • Your budget will make you more aware of how and why you spend your money. continued

6. Budgeting Your Money • Five steps of budget development: • Establish financial goals. • Estimate your monthly income and expenses. • Balance your budget. • Keep track of income and expenses. • Evaluate the budget.

7. Establish Financial Goals • Set short- and long-range goals. • Set up an emergency cash fund to cover unexpected expenses. • Emergency cash fund: Fund that covers unexpected expenses. • Estimate the cost of each goal and when you want to attain them. • Calculate how much money you would have to set aside each month to achieve your goals.

8. Estimate Your Monthly Income and Expenses • Estimate your income, but be conservative. • List all potential expenses. • Fixed expenses – expenses that must be paid regularly. • Flexible expenses – all other expenses that you pay differing amounts.

9. Balance Your Budget • Balance your budget by subtracting your expected expenses from your expected income. • If your expenses are greater than your income, you should increase your income or decrease your expenses. • Your budget is balanced when your expenses equal your income.

10. Keep Track of Income and Expenses • Compare your actual income to your estimated income and record the difference. • Compare your actual expenses to your estimated expenses and record the difference.

11. Evaluate the Budget • Evaluate the budget to see if it is working for you. • If you are overspending in any area, the budget needs adjusting. • As your goals change, your budget will also have to change.

12. Managing Your Consumer Spending • To manage your consumer spending wisely, it is important to: • Be an informed consumer. • Understand advertising and other promotional methods. • Know where to shop. • Know how to shop.

13. Be an Informed Consumer • Consumers: People who use their income to buy items they need and want. • Goods: Any type of product consumers buy. • Services: Any type of work consumers pay to have done. continued

14. Be an Informed Consumer • Consumer resources include: • People – talk to people who have used the product. • Places – school and local library. • Organizations – U.S. Consumer Information Center, Consumers Union. • Printed materials – advertisements, product labels and tags, use and care guides, warranties. • Warranty: A written promise that guarantees a product will meet certain performance and quality standards. • Service contract: An extended warranty.

15. Understand Advertising and Other Promotional Methods • Businesses advertise in various forms of media to inform you about their goods and services. • Use ads to compare products and prices. • Beware of false or misleading ads. continued

16. Understand Advertising and Other Promotional Methods • Special sales offer goods and services at discounted prices to attract customers and increase sales. • Businesses use promotions to bring attention to a product or service through advertising or publicity. • Buying incentives such as coupons, prizes, and in-store games are also used to help sell products.

17. Decide Where to Shop • Types of shopping choices include: • Retail shopping. • Direct selling. • Catalog and mail-order shopping. • Television shopping. • Internet shopping.

18. Developing Shopping Skills • Developing good shopping skills takes practice. • Making a list and planning ahead will help you avoid impulse buying. • Impulse buying: Making an unplanned purchase. • Comparison shopping: Looking at several brands at different stores to compare prices, quality, and features. • Comparison shopping helps you save money, get better quality, and find the most suitable products.

19. Consumer rights Information Selection Performance Safety Recourse Consumer responsibilities Find and use information before buying goods and services. Choose goods and services wisely. Follow instructions and use products for their intended use. Use products safely. Tell businesses or sellers what you like and dislike about their products and services. Exercising Your Consumer Rights and Responsibilities

20. Know the Right Way to Complain • Recourse: The right to complain and receive some response. • If there is a problem with a product or service you bought, complain to the right person immediately. • Write a complaint letter to the company’s consumer affairs department if your problem is not settled.

21. Use Consumer Protection Services • If the results of your complaint are unsatisfactory, you can contact one of the following consumer organizations: • Better Business Bureau (BBB). • News media. • Consumer action groups. • Better Business Bureau (BBB): A nonprofit organization sponsored by private businesses that tries to settle consumer complaints against local business firms.

22. Use Government Protection Agencies • Consumer Product Safety Commission (CPSC): Investigates consumer complaints about product safety. • Food and Drug Administration (FDA): Regulates the production, packaging, and labeling of food, drugs, and cosmetics. • Federal Trade Commission (FTC): Helps prevent unfair competition, deceptive trade practices, and false advertising. • Federal Communications Commission (FCC): Handles complaints about telephones, radio, TV, and cable.

23. Consumer Fraud • Consumer fraud: The use of trickery or deceit to gain some type of unfair or dishonest advantage over the consumer. • Identity theft. • Prizes and sweepstakes. • Internet services. • False advertising. • Fake charities. • Investment scams.

24. Identity Theft • The use of another’s name and personal information such as social security number, address, or credit card numbers. • Skimming: Stealing a credit card number during checkout. • Phishing: Tricking someone into giving out personal and financial information.

25. Avoiding Consumer Fraud • Check out companies carefully before doing business with them. • Do not give out your social security number or account information. • Shred or file receipts. • Review bills and invoices before paying them. • Do not open questionable e-mail messages.

26. Thinking Back • How do you prepare a budget? • What are reliable sources of consumer information? • What are your consumer rights and responsibilities? • What can you do to avoid becoming a victim of consumer fraud?