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    Smart Money Budgets

    Uploaded by

    June Villanueva
    This document provides information about personal budgeting. It defines a budget as a plan for managing money that meets personal needs and goals. The document outlines why budgets are necessary, including developing better financial habits and relieving stress. It then discusses the key aspects of an effective budget, such as setting financial goals and estimating income and expenses. Finally, it provides steps and tips for creating a budget, including reviewing expenses, allowing for unexpected costs, and regularly evaluating progress toward goals.

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    Smart Money Budgets

    Uploaded by

    June Villanueva
    19 views24 pages
    This document provides information about personal budgeting. It defines a budget as a plan for managing money that meets personal needs and goals. The document outlines why budgets are necessary, including developing better financial habits and relieving stress. It then discusses the key aspects of an effective budget, such as setting financial goals and estimating income and expenses. Finally, it provides steps and tips for creating a budget, including reviewing expenses, allowing for unexpected costs, and regularly evaluating progress toward goals.

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    This document provides information about personal budgeting. It defines a budget as a plan for managing money that meets personal needs and goals. The document outlines why budgets are necessary, including developing better financial habits and relieving stress. It then discusses the key aspects of an effective budget, such as setting financial goals and estimating income and expenses. Finally, it provides steps and tips for creating a budget, including reviewing expenses, allowing for unexpected costs, and regularly evaluating progress toward goals.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    19 views24 pages

    Smart Money Budgets

    Uploaded by

    June Villanueva
    This document provides information about personal budgeting. It defines a budget as a plan for managing money that meets personal needs and goals. The document outlines why budgets are necessary, including developing better financial habits and relieving stress. It then discusses the key aspects of an effective budget, such as setting financial goals and estimating income and expenses. Finally, it provides steps and tips for creating a budget, including reviewing expenses, allowing for unexpected costs, and regularly evaluating progress toward goals.

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
    Download as ppt, pdf, or txt
    of 24

    Personal

    Budgeting 101:
    What is a Budget and
    Why do I need one!

    Presenters
    Doug Willis
    Assoc. Dean of Students PRC
    Mark Clark
    Professor of Business Administration

    What Youll Learn


    Necessary
    1. Why is a Budget __________.
    What is a Budget.
    2. _____
    Create a Budget that
    3. How do I _______
    is best suits me.

    Why Its Important


    Following a practical budget can
    help you:
    1. Develop better financial habits.
    2. Relieve emotional stress.
    3. Assist you in achieving your
    financial goals.

    Why is a Budget
    Necessary?
    Identifies and defines your financial goals
    Manages your money
    Directs your money flow
    Increase your savings
    Avoids spending money unnecessarily
    Achieves your personal goals

    What is a Budget?
    a plan for the coordination of resources and
    expenditures
    Merriam-Webster Online Dictionary

    Simply Put:
    A budget is a plan for managing
    your money in a way that best meets your
    personal needs and wants.

    Seven Keys to Effective


    Budgeting
    1. Identify and develop personal goals
    2. Evaluate and record current trends,
    both income and expenses
    3. Assign priorities
    4. Develop a time line for the month
    5. Keep it simple
    6. Remain flexible: One size does not fit all
    7. Review and revise

    Budgeting is Effective
    Money Management
    Effective money management is planning
    how to get the most from your money.
    Good money managers keep track of where
    their money goes so that they can make it go
    farther.
    Effective money management includes:
    Developing personal financial goals
    Organizing personal financial records
    Creating a personal monthly budget
    Evaluating personal financial health

    How do I Create a Budget?


    Creating a budget begins with a clear,
    accurate, and well-thought-out plan. This
    will allow you to be able to:
    1. Adjust plans, activities, and spending as
    needed
    2. Spend money cost-effectively
    3. Reach the specific goals you have set
    4. Strengthen internal control system

    Whats in a Budget?
    INCOME

    Simply any money


    earned or
    contributed to
    your household
    from either
    personal finances
    or a business.

    EXPENSES

    Money that you


    spend, this
    includes anything
    you purchase. This
    includes both
    planned and
    unexpected
    expenses.

    Steps in Budgeting
    1.
    2.
    3.
    4.

    Set financial goals


    Estimate your income
    Record what you spend
    Budget for actual and unexpected
    expenses
    5. Review and evaluate monthly

    Set Financial Goals


    Identify and write them down
    Long term (1-5 years)
    Short term (within a year)

    Make then achievable, practical, and owned by


    everyone
    Keep them in the fore front
    Journal the process
    Celebrate their completion

    Write them into your monthly budget


    Adjust them as necessary

    Estimate Your Income


    Make a list of each income stream that you receive on a
    regular basis each month. The key is to only include that
    income you get every month.
    Include both monthly wages earned from your job(s) as
    well as monthly supplemental income (i.e. child support,
    disability, etc.)
    Mark down the date these are received
    Calculate the monthly income total
    Record, but do not include any periodic income you may
    receive at this point.

    Estimate Your Income


    If your income is unpredictable,
    estimate what you will receive in the
    next month and adjust it DOWN a little

    Record What You Spend


    1. Review the previous months check
    book ledger, bank statements etc. and
    record your spending and income.
    2. Record what you spend for the next
    month and write down what your
    actual expenses and income

    Budget for Actual and


    Unexpected Expenses
    Actual Expenses:
    Identify fixed expenses (i.e. rent, car payment, student
    loans).
    Record the monthly payment deadline and plan according
    to your payday date.

    Variable Expenses:
    Identify recurring expenses the fluctuate (monthly grocery,
    automobile, etc.) calculate an average based on
    previous months NOTE: when in doubt, guess high!
    Consult with friends and family on what they spend

    Actual Expenses
    Rent or Mortgage
    Car payment, upkeep, gas, etc.
    Insurance (health/medical, life, auto,
    home, et.)
    Food
    Household utilities
    Clothing
    Entertainment

    What Else is in a Budget?


    Student loan payments
    Insurance payments
    Entertainment (movies, books, magazines, toys, cable TV,
    Internet access)
    Income taxes in addition to those withheld from your paycheck
    Child care
    Medical bills
    Savings (transfers to savings account, retirement fund or
    brokerage account)
    Vacations

    Budget for Actual and


    Unexpected Expenses
    1.
    2.
    3.
    4.
    5.

    The FIRST step is to create and maintain an Emergency Fund.


    Initially the Emergency Fund should be $500 - $1, 000
    depending on your income and debt load.
    Eventually you need to increase this to 3-6 months worth of
    income.
    Develop the attitude that this is ONLY used for EMERGENCIES
    (unemployment, unexpected medical needs or any other
    financial crisis).
    Should you have to use money in this fund for an
    EMERGENCY the priority for the next month is to re-supply
    the fund.

    Remember Murphy always strikes!

    Budget Resources
    Use these resources for additional
    information:
    http://www.stats.bls.gov/news.release/cesan.toc.htm

    http://www.practicalmoneyskills.com

    http://consumerist.com/consumer/tools/the-zero-basedbudget-300076.php

    Budgeting Terms
    Surplus occurs if you have a positive cash
    flow
    Deficit occurs if you have a negative cash
    flow
    Discretionary Income is the money you
    have left over after paying for essentials
    Discretionary Income is used to evaluate
    the strength of a persons income
    Represents the money you can spend
    on wants

    Review & Evaluate


    Review on a monthly basis, especially when you begin
    the process.
    Evaluate the budget against your personal financial
    goals.
    All monthly deficits need to be addressed immediately
    All surplus experienced needs to be added to savings
    Consider operating on a cash envelope system
    Do not get discouraged.

    Practical Budgeting Tips

    The budget must BALANCE


    The income must equal the expenses. If you make,
    you must have a destination for that money!
    That does NOT mean you MUST SPEND it. Planning
    to put money in some type of savings account is a
    GREAT idea.
    The Income MUST EQUAL Expenses!!
    Plan carefully
    estimates should be based on some data
    cover all expenses
    Be practical
    Be flexible
    Write your budget down
    Be able to access your budget data easily

    Questions

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