Transcript Money Management - 101 Practical Money Skills for Life What a Spending Plan will do for You $ Allow you to learn how finances.

Money Management
- 101
Practical Money Skills for Life
What a Spending Plan will do
for You
$ Allow you to learn how finances work in your
life
$ Enable you to make good decisions about
how you use money
$ Make you aware of where your money is
going
$ Give you a way to save for specific items
$ Help you to live within your income- or
decide if you need to increase it
A Spending Plan will
Show you where to cut spending
Provide methods for keeping good
records of spending
Allow you to spend money without feeling
guilty
Create a way to measure your progress
Improve communication with other
people
Step 1: Assess Needs
Make a realistic list of needs and wants
Needs
Wants
Food
Clothing
Housing
Transportation
Child Care
Insurance
Medicines
Lots of Money
Cell Phone
VCR or Big TV
New Car
Designer Jeans
Vacations
Boat
Titan Tickets
Step 2: Set Goals
Make sure your goals are SMART…
Specific- Clearly state what you want to do
Measurable- Measure by time and/or money
needed
Attainable- Make sure your goal is realistic and
possible
Relevant- Make sure goals fit your needs
Time related- Set a definite target day
(day/month/ year)
Step 3: Make a Plan
Put things in Priority Order- Imagine the
actions you need to take to get from
where you are now to where you want to
be.
Goals are dreams with deadlines! Post
your goals where you will see them
frequently. Find a picture to represent
your goals. Make them happen.
SMART GOAL
GOAL: Use cash to purchase a refrigerator in 6 months. New
refrigerator will cost $600.00.
MUST SAVE FROM EACH PAYCHECK:
$100/Paycheck - if paid monthly
$50/Paycheck - if paid bi-weekly or semi-monthly
$25/Paycheck - if paid weekly
Your Plan with Actions
I will save $25.00 from each weekly paycheck for refrigerator.
Steps to Get There:
•Pack lunches.
•Borrow movies and CD’s from the library.
•Shop with a list for everything.
•Stay out of Walmart!
TARGET DATE:
6 MONTHS
PRIORITIZING GOALS
1. Build an emergency savings of $_____________.
A. Put $50.00 from each paycheck for 5 months.
B. Use OVERTIME or BONUS $$ to build more
quickly.
2. Build a retirement account.
Put $50.00 (automatic deduction)
401(k)
Roth IRA
Two Parts of Money
Management
 The money that
comes in - INCOME
 Regular take home
income
 The money that goes
out – SPENDING
 Must know what you
are spending to
develop a plan for
managing your
money.
 Three type of
expenses
Making your Money
How much money comes in each month?
Income has two parts:
1) Gross income- total you actually earn
2) Net income (take home pay) - what is
left over after your employer takes out
deductions for taxes, Social Security,
Medicare, and other needs.
Three Types of Expenses
 Fixed expenses
 Flexible (variable or controllable)
expenses
 Periodic or occasional expenses
FIXED / MONTHLY EXPENSES
•Car Payments
•Rent or Mortgage
•Child Care
•Cable TV
•Car Insurance
FLEXIBLE / VARIABLE EXPENSES
•Clothing
•Food
at home
away from home
•Telephone
•Utilities
•Gasoline
FLEXIBLE / VARIABLE EXPENSES (cont)..
•Public Transportation
•Medical / Dental
•Recreation
•Supplies
household
personal
OCCASIONAL / SEASONAL EXPENSES
Car Maintenance / Repairs
$500
License Tags
$100
Insurance Payments
$600
Gifts / Holidays
$800
School
$0
Taxes
$200
Magazine Subscriptions
$0
Vacations
$200
$2400 / 12 = $200/month
Tracking your money
Keep and organize the following items to help
you keep up with expenses
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Check registers
Check stubs and canceled checks
Receipts
Bills and invoices
Credit card statements
Calendars, diaries, pocket notebooks
Trimming Expenses
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Pack lunch for work or school
Shop for store or generic brands
Use the public library
Choose free recreational activities
Check resale shops or garage sales for
bargains
Eat out less often
Handle home maintenance and repairs
yourself
Use public transportation when possible
Take advantage of free activities
SAVINGS
It’s never impossible to
save money, no matter
how small the amount.
Saving Your Money
Two types of savings accounts…
1)Emergency fund – provides means for
paying for emergencies instead of
using credit
2) Nest egg account- helps you reach
specific goals such as buying a house
or taking a vacation
Start the Savings Habit
Now!
$ If you save $20 per week, every week for
a year, after one year you will have saved
$1,040!
$ Keep this up and after five years you will
save $5,200, not to mention the interest
you will earn!
WAYS TO SAVE
Work average 22 days/month
Lunch
$8.00/day
$176/month
Coffee
$1.00/day
$22/month
Soft Drinks
$1.00/day
$22/month
Child’s Lunch
$2.00/day
$44/month
Total $264/month
Remember these tips…
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Don’t shop on payday
Don’t shop when you’re tired
Don’t shop for food when you’re hungry
Take your time. Try not to shop when you have
to hurry
You don’t have to buy it today
Remember, nothing is a bargain unless you
need it
Have a spending plan and stick to it
No one can make you buy anything
How much debt is too
much?
Rule of thumb for consumer debt
Under 15%=comfortable 15-20%=Caution
Over 20%=Danger!!!
To figure your debt-to-income ratio:
Total average monthly debt payments
(excluding mortgage/rent and utilities) $400
Monthly take-home pay
$2,000
$400 ÷ $2,000 = .20 = 20%
Managing your Money
Developing a Personal Spending Plan will
show you…
$ What money is coming in
$ How much you spend on the basic needs,
fixed and variable
$ How much you need to set aside for periodic
or unexpected expenses
$ How to plan for savings and investing
$ What is left over for your wants
Money Management
- 101
Get the most from
your Money
Set Goals
Develop a Plan
Balance Spending and Saving