CHAPTER 6 BUDGETING How Will You Use Your Money?
Download
Report
Transcript CHAPTER 6 BUDGETING How Will You Use Your Money?
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
WHAT’S AHEAD
6.1 Choose Financial Goals
6.2 Track Income and Expenses
6.3 Your Budget Worksheet
6.4 Create Your Budget for the Year
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
LESSON 6.1
Choose Financial Goals
GOALS
►Identify your financial goals.
►Explain how your goals might affect your family and
community.
Slide 2
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Types of Financial Goals
►Budget
►Short-term financial goals
►Long-term financial goals
►Balancing short-term spending with long-term success
Slide 3
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Types of Financial Goals
Budget – A plan for dividing income among spending
and saving options.
It can help you achieve more of what is important to
you during your life span.
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Types of Financial Goals
Short-term financial goals – things you hope to
achieve in less than one year.
Long-term financial goals – things you want to
achieve over more than one year.
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Types of Financial Goals
Life-span goals - the most important things
you hope to achieve during your lifetime.
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Your Goals Affect Others
►Your family and your goals
►Your current family
►Your future family
►Your community and your goals
Slide 7
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Why should your short-term goals fit in with your
life-span goals?
Why do other members of a community benefit
when individuals within that community achieve
their life-span goals?
Slide 8
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Why should your short-term goals fit in with your
life-span goals?
If a person’s short-term goals do not contribute to his or her
life-span goals, it is unlikely that these goals will ever be
achieved.
Slide 9
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Why do other members of a community benefit
when individuals within that community achieve
their life-span goals?
Other members of a community will benefit because
individuals who achieve their life-span goals will be
productive citizens in their chosen careers and spend
income in that community, pay taxes, and not require
public assistance.
Slide 10
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
LESSON 6.2
Track Income and Expenses
GOALS
►Describe how to set up an effective filing system for
your records.
►Explain the difference between fixed and flexible
spending.
Slide 11
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
KEY TERMS
fixed expense
flexible expense
luxury good
Slide 12
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
KEY TERMS
fixed expense – Amounts you are committed to
spend.
flexible expense – Amounts that you can choose
to spend or not.
luxury good – goods that have special qualities
that make them more expensive than
alternative goods.
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Keep Financial Records
►Track your income
►Track your spending
►Establish a filing system
►Effective record keeping
►How to use financial records
Slide 14
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Describe a filing system you could set up to keep
records of your financial transactions.
How do fixed and flexible expenses affect your
spending plan?
Slide 15
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Describe a filing system you could set up to keep
records of your financial transactions.
A filing system needs to be . . .
• comprehensive
• easy to use
• easy to maintain
Slide 16
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
How do fixed and flexible expenses affect your
spending plan?
• Fixed expenses must be paid and therefore must be
included in a spending plan.
• Flexible expenses may be important, although not
required, and should be included in a spending plan, but
not to the extent that they prevent payment of fixed
expenses.
Slide 17
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
LESSON 6.3
Your Budget Worksheet
GOALS
►Identify steps you should take to create a budget
worksheet.
►Explain common problems with budgeting.
Slide 18
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
KEY TERM
budget worksheet – a planning
document on which you record your
expected and actual income and
spending over a short time, usually a
month.
Slide 19
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Create Your Budget Worksheet
►Step 1: Create a worksheet
►Step 2: Estimate your income
►Step 3: Estimate your expenses and savings
►Step 4: Record your actual income and expenses
►Step 5: Calculate the differences
Slide 20
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Budget Pitfalls
►Few consumers have realistic budgets.
►Some people get too specific.
►Some people don’t predict the correct amount of their
flexible expenses.
►Some people lump too many expenses under
miscellaneous.
►Some people give up on budgets because they think
budgets take too much time and effort.
Slide 21
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
What steps should you take to create a budget
worksheet for yourself?
What are some problems people may encounter
when trying to budget?
Slide 22
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
What steps should you take to create a budget
worksheet for yourself?
• The best way to estimate future income and spending is
to examine past income and spending.
• Maintaining an accurate and complete record of income
and spending will enable an individual to construct an
appropriate one-month budget worksheet.
Slide 23
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
What are some problems people may encounter
when trying to budget?
People run into problems with budgets when they . . .
• Are too detailed
• Incorrectly predict the amount of flexible expenses
• Lump too many expenses under the miscellaneous
category
• Fail to set aside time to maintain the budget
Slide 24
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
LESSON 6.4
Create Your Budget for the Year
GOALS
►Evaluate and adjust your budget worksheet.
►Explain why consumers should create and update
yearly budgets.
Slide 25
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
KEY TERM
audit
Slide 26
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Evaluate Your Budget Worksheet
►Adjust your spending
►Make several plans
Slide 27
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Budgeting for the Year
►Review and adjust your budget
►Relate your goals to your budget
►Adjust to changing goals
►Family budget
►Planning together
►Compromising
►The budget cycle
Slide 28
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
Sample Family Budget
Utilities 9.5%
Entertainment 5.2%
Food 9.8%
Clothes 13.7%
Savings 5.0%
Car 12.8%
Home 44.0%
Slide 29
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
How should you adjust your budget worksheet to
receive the greatest satisfaction from your
income over time?
What steps should people take to create and
update their yearly budgets?
Slide 30
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
How should you adjust your budget worksheet to
receive the greatest satisfaction from your income
over time?
• If your spending exceeds estimates, you can either adjust
your spending estimates or change your spending habits.
• You should choose whichever option best meets your lifespan goals.
• Completing several budget worksheets will show various
spending and saving options and allow you to select the
one that works best for you.
Slide 31
© 2010 South-Western, Cengage Learning
ECONOMIC EDUCATION FOR CONSUMERS ○ Chapter 6
What steps should people take to create and
update their yearly budgets?
• By reviewing your budget at least once a year, you can
compare your financial plan with what actually happened.
• You can also assess outcomes in light of any of your
goals that may have changed.
• With these evaluations in mind, you can make
appropriate adjustments for your next year’s budget.
Slide 32
© 2010 South-Western, Cengage Learning