financial decisions and planning. chris tucker dorthy hamill mike tyson nicholas cage
TRANSCRIPT
Financial Decisions and Planning
CHRIS TUCKER
DORTHY HAMILL
MIKE TYSON
NICHOLAS CAGE
WHAT ARE NEEDS AND WANTS
Based on your definition of needs and wants, list five needs and five wants
NEEDS WANTS
We must choose between are needs and wants. Individuals only have limited resources to obtain their needs and wants.
A. Resources Limit Choicesa. People’s _____________________ are limited while are wants and needs are ______________________ and growing.
b. Must make choices because most people do not have enough resources to meet all their needs and wants.
c. ______________________________ is the amount of money a person has to spend after needs are met.
Financial Resources
Unlimited Resources
Discretionary Income
How are Income and Wealth Measured?
The Personal Cash Flow Statement
lists your cash inflows and your cash outflows for a period of time.
If Cash Inflow > Cash Outflow =
Net Income
If Cash Inflow < Cash Outflow =
Net Loss
Sample Personal Cash Flow Statement
PERSONAL CASH FLOW STATEMENT
Cash InflowsWork (Part-time) 120.00$ Allowanced for household chores 40.00$ Lunch money allowance 60.00$ Savings Account Interest 2.00$ Total Cash Inflows 222.00$
Cash OutflowsGifts 20.00$ Clothes and shoes 60.00$ Loan Payment to parents 20.00$ Lunches 60.00$ Entertainment/miscellaneous 40.00$ Total cash outflows 200.00$
Net Cash Flow 22.00$
ANDREA JONESPERSONAL CASH FLOW STATEMENT
September 1 -30, 2011
Cash Inflows
Total Cash Inflows
Cash Outflows
Total cash outflows
Net Cash Flow
PERSONAL CASH FLOW STATEMENT
PERSONAL CASH FLOW STATEMENT
DON JONES
September 1 – 30, 2011
Work (Part-Time) $440.00Breakfast/Lunch Allowance 60.00Chores 40.00
Savings Account Interest 5.00545.00
Breakfast/Lunch Expenses 60.00
Gasoline Expense 50.00Savings 40.00
Entertainment Expense 50.00
200.00
345.00
The Personal Net Worth Statement
Shows a persons net worth based on his or her assets and liabilities.
__________________are money and items of value that you own.
ASSETS
__________________are the debts you owe
Liabilities
ASSETS – LIABILITIES = NET WORTH
Sample Personal Net Worth Statement
PERSONAL Net Worth Statement
ASSETS LiabilitiesCash and checking Account 452.56$ Car Loan 1,100.00$ Savings Account 500.00$ Credit Card Debt 200.98$ Savings Bonds 300.00$ Total Liabilities 1,300.98$ Baseball Card Collection 100.00$ Computer, iPod, games 300.00$ Net WorthCar, current value 3,000.00$ Assets minus liabilities 3,351.58$ Total Assets 4,652.56$ Total liabilities and Net worth 4,652.56$
John SmithPERSONAL NET WORTH STATEMENT
September 30, 2011
Prepare a Personal Net Worth Statement
ASSETS Liabilities
Total Liabilities
Net WorthAssets minus liabilities
Total Assets Total liabilities and Net worth
PERSONAL NET WORTH STATEMENT
PERSONAL Net Worth Statement
Assets growing in value are said to be appreciating
Ben Lingo
Car 2,000.00Savings Account 150.00Checking Account 82.00
Personal Property Inventory 3,000.00
$6,232.00
Car Loan $1,500.00Credit Card 1,000.00
$2,500.00
$3,732.00
$6,232.00
October 31, 2012
MBD BIKE 1,000.00
How Can you Make Good Financial Choices?
A. Decision-Making Process:
a. Deciding one option in exchange for another is called a _______________.
b. The trade off results in an ______________________________ the value of your next best option (what you are giving up.
TRADE OFF
Opportunity Cost
6-Step Decision Process Define the Need
List options for meeting the need.
Compare the options you have identified.
Make a Decision.
Take Action Based on your Decision.
Reevaluate your choice
Financial Strategies Financial choices should be
forward looking When in doubt to buy a product
or service, do not buy Do not make a quick decision –
Buyer’s Remorse Spend less than your income. Be realistic about which wants
you can fill. Read all financial agreements Learn from others mistakes.
AssignmentAssume that you belong to a school
club that has ten members and two teacher advisers. The club members and advisers are planning to attend a conference in your state capital. Apply the decision – making process you learned in this chapter to help you decide how your club should travel to the conference. Work with a classmate to complete this activity. Complete the following activities in a word document. You will be given 1 class period to work on this.
Complete activities a through e.
4-2 Basics of BudgetingBudget
Variable Expenses:
Fixed Expenses:
Charitable Giving
is spending and saving plan based on expected income and expenses.
costs that can go up and down each month.
costs that do not change each month.
the act of donating money or time to a cause in which you believe.
What is the Purpose of Budgeting? Budget is a plan on how you will
spend and/or save your money.
Based on your expected income and expenses.
You may need to adjust your budget – using spreadsheet software makes this very easy.
How Do You Prepare a Budget?
a. Look at the amount available to spend or save.
b. Decide how much you will save and how much you will spend.
c. Compare your actual spending and saving to the budget you created.
4 Simple Steps in Preparing a Budget.1. Estimate Income
a. You may have different sources of income.
b. Calculate income for the year from both earned and unearned income.
2. Plan Savingsa. Pay yourself first
3. Estimate Expensesa. Variable Expenses costs that
can go up and down each month.
Examples: Gas Bill, Electric Bill, Food, Clothing,
b. Fixed Expenses: costs that do not change each month.
Examples: Mortgage Payment, Car payment, life insurance premium, cable bill
Charitable Giving: the act of donating money or time to a cause in which you believe.
Balance the Budget.
Total Savings = Total Expenses
SAMPLE BUDGET
Weekly Monthly Yearly
IncomeWork (Part - Time_ 30.00 120.00 1,440.00allowance for household chores 10.00 40.00 480.00Lunch Money Allowance 15.00 60.00 720.00Savings Account Interest 0.50 2.00 24.00Total Income 55.50 222.00 2,664.00
SavingsDeposit toSavings Account 5.50 22.00 264.00
ExpensesGift 5.00 20.00 240.00Clothes and shoes 15.00 60.00 720.00Loan Payment to Parents 5.00 20.00 240.00Lunches 15.00 60.00 720.00Entertainment/miscellaneous 10.00 40.00 480.00Total Expenses 50.00 200.00 2,400.00
Total Savings and Expenses. 55.50 222.00 2,664.00
PERSONAL BUDGETJOHN JONES
BUDGET FOR 2011
Preparing a Budget AnalysisVariances:the differences between planned
amounts and actual amounts.
1.Favorable Variance: Earned or saved more than you estimated.
2.Unfavorable Variance: _Earned or saved less than you estimated.
Variance Analysis on John Jones’ Budget: Calculate the actual amount John spent during the month and the Variance Analysis Monthly Actual Difference
IncomeWork (Part - Time_ 120.00 110.00 -10.00allowance for household chores 40.00 50.00 10.00Lunch Money Allowance 60.00 60.00 0.00Savings Account Interest 2.00 2.00 0.00Total Income 222.00 0.00
SavingsDeposit toSavings Account 22.00 22.00 0.00
ExpensesGift 20.00 16.00 4.00Clothes and shoes 60.00 70.00 -10.00Loan Payment to Parents 20.00 22.00 -2.00Lunches 60.00 55.00 5.00Entertainment/miscellaneous 40.00 35.00 5.00Total Expenses 200.00 198.00 2.00
Total Savings and Expenses. 222.00 220.00 2.00
-8% U25% F
000
0
20% F-17% U-10%8% F13% F
-1%
.9-%
Practice Problem