Budgeting

Creating a Plan for Your Spending

$50.00

What would you do if someone gave you $50?Would you spend it on something, would you

save it?What would you do?

Vocabulary

• Budget: a plan for managing your money during a given period of time

• Expense: things you pay for each month with your income

• Fixed Expense: expenses that are the same each month (same amount, pay every month)

• Variable Expense: expenses that are not the same each month, they fluctuate

What Type of Expense Is It?Description Fixed Variable Periodic

Groceries

Piano Lesson Fee

Cable TV Bill

Magazine Renewal

Car Loan Payment

***Periodic Expense: expenses that you don’t pay for each month, pay on as needed basis***

P.Y.F.

• Pay Yourself First!

Do the Math!

• The Simpson family wants to buy a new refrigerator for the kitchen. Mr. Simpson has visited several stores and estimates that it will cost around $700 to buy and install the type of refrigerator the family wants. If their goal is to buy it in six months, how much do they need to save a month?

Do the Math!

• The Mencias want to buy their oldest daughter a computer to take to college next year. They’ve shopped around and think they can get a good desktop computer with all the software and a printer for about $1,100. With 15 months to save, how much do they need to set aside a month?

Steps to Create a Budget

• Decide time frame for tracking income/expenses– Jackson’s Monthly Budget

• Identify your total incomeJackson’s Estimated Income:Paycheck (after taxes) $2,100Interest Earned: $50Total Income: $2,150

Steps to Create a Budget• Identify all your expenses (fixed or variable)Jackson’s Fixed Expenses

Savings (PYF) $500Car Payment $325Rent $750Cable TV/Internet $75

Jackson’s Variable ExpensesUtilities $150Food $200Gas $100

Jackson’s Periodic ExpensesCar Insurance ($300/6mo) $50

Steps to Create a Budget

• Do the math (subtract total expenses from income)

Jackson’sTotal Expenses $2,150Total Income $2,150-Total Expenses $2,150

$0• Evaluate your budget

Build a Budget

Jessica is a Senior in high school. She earns $8 an hour working approximately 25 hours a week at the local grocery store. About 30% of her pay is deducted for taxes. Jessica also earns approximately $15 each month in interest on savings.

What is Jessica’s monthly income?

Build a Budget

Jessica’s Monthly ExpensesSavings: 10% of her incomeCar payment: $235Cell Phone: $35-$45Gas: $40-$60Auto Insurance: $50Frequently buys games and music $25-$45Typically buys her own clothes $30-$50 List Jessica’s monthly expenses, identify if each expense if fixed or variable, estimate cost of variable expenses

Build a Budget

• One of Jessica’s short term goals is to take a trip to visit her grandparents right after graduation (in June). She expects this to cost $1,000 and she has already saved $500.

Add this expense under her savings category (which already has 10% of her income listed)

It is October, Jessica has 8 months to save $500

Build a Budget

• Add the fixed expenses together– Total Fixed Expenses:

• Add the variable expenses together– Total Variable Expenses:

• Add the Fixed and Variable expenses together– Total Expenses:

• Subtract Expenses from Total Income– Are we within our limit?