why create a budget? a budget helps you understand where your money goes. it helps you live within...
TRANSCRIPT
Why create a budget? A budget helps you understand where your
money goes.
It helps you live within your means and meet your goals.
It helps you find uses for your money that will increase your wealth.
It puts you in control of your money.
Working Out Your Budget
Focus Questions
1. What is the difference between a fixed expense and a variable expense?
2. What income should you include in a budget?
3. Do unexpected gifts of money, say from a birthday present, go in your budget?
4. How can you come up with estimates for both income and expenses?
5. How can you protect yourself from large, unexpected expenses?
Estimating Income and Expenses
cash flow the amount of money you take in (income) and spend (expenses)
Estimating your expenses involves figuring out what you will be using your money to pay for
Which expenses come up on a regular basis?
Preparing a Cash Flow Statement
A cash flow statement (income and expense) is a summary of your receipts and payments for a given period of time
Includes fixed and variable expenses, savings and sharing
Figuring Your Income
Include wages or salary, allowance, interest on investments and savings
Do not include birthday cash, bonuses, earnings on eBay
Figuring Your Expenses
Fixed Expenses expenses that stay the same from month to month
May include rent or mortgage payment, car payment, auto insurance, student loan, health insurance
Also bills that do not fluctuate too much such as electricity, gas, cable TV, Internet, cell, food
Variable Expenses
Variable expenses are those that change from month to month
May include auto repair, clothes, out of pocket medical and dental
Unexpected Expenses
Set aside extra money each month to prepare for these unexpected events
May include plumbing disaster, car accident
Emergency Fund
Money set aside for unexpected expenses
A good rule of thumb is to set aside 5 percent of your monthly income
Sharing and Savings
Don’t forget to budget for sharing and savings
Think about what causes are important to you
Focus Questions
1. What features does a good budget have?
2. What is likely to happen if you do not stay on track with your budget?
3. What should you do if your budget does not seem to work?
Using Your Budget
Budget surplus a situation in which money is left over after all expenses have been paid
Budget deficit a situation in which there is not enough money to cover expenses
Setting Up Your Own Budget
Look back on your spending habits, and consider the goals you have set for your financial future
1. What are your spending priorities?
2. How much do you plan to save?
3. What are you saving for?
4. With which causes do you want to share your money?
How much to put away each month for variable expenses?
Example auto costs, entertainment, clothing etc.
How much to set aside for savings, emergency fund, and sharing?
Qualities of a Good Budget
It is based on your values It is geared towards your goals (short, medium, and
long term) It is practical It is flexible (circumstances change) It is accessible and easy to use (keep it on a computer
where you can easily modify it if need to)
Assessing and Revising the Plan
Major life changes (Starting a family) Owning a car instead of using public transportation New Job