Transcript CREATING A BUDGET THIS MODULE IS DESIGNED TO HELP STUDENTS BUILD A PROPER BUDGET AND ENCOURAGE SMART SPENDING.

CREATING A BUDGET
THIS MODULE IS DESIGNED TO HELP STUDENTS BUILD A
PROPER BUDGET AND ENCOURAGE SMART SPENDING.
INTRODUCTION
• Do you not know where your money is being spent?
• Do you often run out of money before you
expected?
• Do you think you could manage your money
better?
If you answered yes to any of these questions,
creating a budget can help you!
BASICS OF BUDGETING
• Having control over your
money is important, both for
your financial well-being and
for your peace of mind
• Creating a budget with the
help of a template can help
you feel more in control of
your finances and allow you
to save more money for your
short- or long-term goals
DID YOU KNOW . . .
Money is the number one reason for divorce in the United
States.
Financial Infidelity – may be the new normal.
In a recent survey – 1 in 3 Americans (31%) who have
combined their finances admitted lying to their spouses about
money, and another 1/3 of these adults said that they have
been deceived.
Breakdown of Money Lies
• 58% hid cash
• 54% hid minor purchases
• 30% hid a bill
• 16% hid a major purchase
• 11% lied about debt
• 11% lied about earnings
COLLEGE STUDENTS TODAY
• 40 million Americans have student loans. More than
70 percent of U.S. students who graduate with a
bachelor’s degree leave with debt, which averages
$28,400 – The White House
(projectonstudentdebt.org)
SET YOUR GOALS
• Make a list of all the financial goals you want to accomplish
over the short and long term
• Why are those goals are your priorities?
• How do you plan to achieve them and how quickly do you
need to see the results
• Short-term goals should take no longer than a year to achieve
• For example, you may want to pay off your credit card debt or save
up for holiday presents
• Long-term goals may take years to reach
• For example, saving for retirement or your child's education
• Don't think that your goals have to be set in stone, you can
update your list whenever it's needed and apply it to your
budget worksheet
• If you don’t know where your savings goal should be, start by using the
Merrill Edge retirement calculator to figure out how much money you
may need in retirement
MAKE YOUR PLAN
• Start by dividing your net income into 2 broad spending
categories
• Fixed & variable expenses
• Fixed expenses stay the same each month
• Mortgage or gym membership fees
• Variables expenses change from month to month
• Entertainment or gas for your car
• For both fixed and variable expenses, you'll want to record how
much you spend on each
• You may consider using a personal budget template to account for
and categorize your monthly spending.
• You may also want to divide your spending into 3 basic
categories
• needs, savings, and wants
• Needs include fixed and variable costs that are essential to your
daily well-being
• Savings include your emergency fund and retirement accounts
• Wants covers everything else
KNOW YOUR NET INCOME
• Identify the money you have coming in, otherwise
known as your income
• Keep in mind that it's easy to overestimate what you can
afford if you think of your total salary as what you have to
spend
• Remember to subtract your employer deductions
• Social Security, taxes, 401(k) and flexible spending account
allocations
• Your final take-home pay is called net income and
that is the number you should use when creating a
budget
TRACK YOUR SPENDING
• Expenses can be difficult to track
• Spending journal
• Find a small notebook and use it to write down each purchase
you make every day for a month
• Save all receipts
• Add them up at the end of the month
• Online banking record
• If you use a debit or credit card for most purchases
• Smart phone apps
• Expense IQ
• Once you have a good estimate of these
expenditures each month, incorporate it into your
personal budget worksheet
CREATE A MONTHLY BUDGET
• Did you
stay within
your
budget?
Income
Pay Check
Financial
Aid
Expenses
$
850.00
Rent
$
450.00
$
750.00
Groceries
$
300.00
Scholarships $
150.00
Entertainment $
200.00
Gifts
$
100.00
Utilities
$
140.00
Total
$ 1,850.00
Miscellaneous $
100.00
Dining out
$
60.00
Total
$ 1,250.00
UNDERSTAND WHERE
YOUR MONEY IS GOING
Monthly Living Expenses
Rent
8%
5%
36%
11%
Groceries
Entertainment
16%
Utilities
24%
Miscellaneous
Dining out
SMALL PURCHASES ADD UP
oGrande White Chocolate Mocha @ $4.25
o $4.25 x 30 days = $ 127.50
o $4.25 x 365 days = $ 1,551.25
o8in Italian Night Club from Jimmy Johns @
$5.75
o $5.75 x 30 days = $ 172.50
o $5.75 x 365 days = $2,098.75
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PERSONALIZE YOUR BUDGET
• You can customize a budget to your own needs
• After you've determined what to set aside for your
fixed expenses, you can alter the amount
earmarked for variable items
• The variable category gives you more wiggle room
in how much you decide to spend where, allowing
you to prioritize as you see fit
• For example, you might decide you can spend less on
clothes each month in order to give yourself more money to
save toward buying a new TV
HAVE A MONTHLY CHECK-IN
• Take a look at your spending every month and
compare it to your personal budget worksheet to
see how things are going
• If you find that you're often going over-budget in
some areas out of necessity, you should consider
cutting elsewhere to keep things under control
WORK CITED
• Bank of America
• Reuters