Transcript 2.05 The Brown Family

2.2.5.G1
Congratulations!
You have been hired as a financial
advisor for John and Tia Brown
Financial Advisor Information
Your Job
• Developed a Statement of
Financial Position and Income and
Expense Statement
• Identified the following goals:
Increase the
amount of their
emergency
savings fund
Pay more on their
monthly car loan
payment to pay
the loan off faster
• Develop a
spending plan for
the Brown family
Spend less money
dining out at
restaurants
Spend less
money on
clothing every
month
© Take Charge Today – August 2013 – Spending Plans – Slide 1
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
The Brown Family
Step One: Track
Current Income and
Expenses
Financial Advisor
Information
Kept all receipts
for the month of
January to
create an
Income and
Expense
Statement
Your Job
Review John and
Tia’s January
Income and
Expense
Statement for a
realistic view of
their income
and expenses
© Take Charge Today – August 2013 – Spending Plans – Slide 2
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
Step 1:
Track Current Income and Expenses
Completed by
developing an
Income and
Expense Statement
Step 5 - Evaluate
and Make
Adjustments
Step 1 - Track
Current Income and
Expense
Step 4 Implement and
Control
Ensures spending
plan is realistic
Step 2 Personalize Your
Spending Plan
Step 3 Allocate
Money to
Each Category
© Take Charge Today – August 2013 – Spending Plans – Slide 3
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
The Brown Family
Step Two: Personalize
Your Spending Plan
Financial Advisor
Information
• Requested a
spending plan for
the month of
February
• Requested the
same document
and categories as
the Income and
Expense
Statement
Your Job
• Find the column
on the Income
and Expense
Statement
where the
Spending plan
will be created
© Take Charge Today – August 2013 – Spending Plans – Slide 4
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
Personalize Your Spending Plan
How will you
develop a
spending plan?
What is the intended
time period for your
spending plan?
What categories
will your spending
plan include?
Step 5 - Evaluate
and Make
Adjustments
Step 1 - Track
Current Income and
Expense
Step 4 Implement and
Control
Step 2 Personalize Your
Spending Plan
Step 3 Allocate
Money to
Each Category
© Take Charge Today – August 2013 – Spending Plans – Slide 5
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
How will you develop a
spending plan?
Paper and pencil
Any
written
method
that works
for you
Spreadsheet
Money management
computer software
Applications
How would
you develop a
spending
plan?
© Take Charge Today – August 2013 – Spending Plans – Slide 6
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
What is the intended
time period for your
spending plan?
What categories will your
spending plan include?
• Usually concurrent with
pay period
• Reference tracking from
the Income and
Expense Statement
• Do any categories need
added, changed, or
removed?
What time period
would you choose
for your spending
plan?
© Take Charge Today – August 2013– Spending Plans – Slide 7
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
The Brown Family
Step Three: Allocate
Money to Each
Category
Financial Advisor Information
• Indicated a * next to expenses
that are either contractual or
they are unwilling to decrease
• Remember goals
• Consider trade-offs
• Must have a net gain or a zero
balance
© Take Charge Today – August 2013 – Spending Plans – Slide 8
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
The Brown Family
Step Three: Allocate
Money to Each
Category
Your Job
• Develop a spending plan for
the family
• Explain each change made
• Re-write goals into SMART
goals using their new
spending plan
© Take Charge Today – August 2013 – Spending Plans – Slide 9
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
Allocate Money to Each Category
Reference tracking
from Step One
Step 5 - Evaluate
and Make
Adjustments
Step 1 - Track
Current Income and
Expense
Step 4 Implement and
Control
Determine what
changes to make
Step 2 Personalize Your
Spending Plan
Step 3 Allocate
Money to
Each Category
© Take Charge Today – August 2013 – Spending Plans – Slide 10
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
When allocating money consider:
Trade-offs and
opportunity
costs
Goals
Contractual
expenses
Contractual
Non-contractual
Required to pay expense for a
specific amount of time - not
easy to reduce or eliminate
Easy to reduce or eliminate
Rent, Internet, Cell phone
Food, entertainment
© Take Charge Today – August 2013 – Spending Plans – Slide 11
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
Spending Plan Guide
18%
Saving and Investing
10%
10%
7%
Insurance 7%
Housing 30%
15%
Transportation 20%
30%
20%
Food 15%
Other 18%
What variables may cause these
percentages to be different?
© Take Charge Today – August 2013 – Spending Plans – Slide 12
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
Net Gain or Net Loss?
Income
Expenses
Net Gain?
• Add more
money to
savings or
another
expense
Net Gain
or Net
Loss
Net Loss?
• Increase
income
• Decrease
expenses
• Both
© Take Charge Today – August 2013 – Spending Plans – Slide 13
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
The Brown Family
Step Four: Implement and Control
Your Job
•Recommend a
control system
for John and Tia
© Take Charge Today – August 2013 – Spending Plans – Slide 14
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
Step 4:
Implement and Control
Make your planned
spending decisions
Use a control system
to stay on track
Step 5 - Evaluate
and Make
Adjustments
Step 1 - Track
Current Income and
Expense
Step 4 Implement and
Control
Step 2 Personalize Your
Spending Plan
Step 3 Allocate
Money to
Each Category
© Take Charge Today – August 2013 – Spending Plans – Slide 15
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
Which control
Control Systems
system would
help you stick to
Money management computer software
your spending
plan?
Internet-based spending plan program
Depository institution programs
Check register system
Envelope system
© Take Charge Today – August 2013 – Spending Plans – Slide 16
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
The Brown Family
Step Five: Evaluate and Make
Adjustments
Financial Advisor
Information
• John and Tia
realized that if
they dine out at
restaurants less
often they will
need to increase
their monthly
grocery expense
Your Job
• Increase their
grocery budget
by $20.00
• How has
developing a
spending plan
helped the
Brown family?
How could
creating a
spending plan
help you now
and in the
future?
© Take Charge Today – August 2013 – Spending Plans – Slide 17
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
Evaluate and Make Adjustments
How well did your
spending plan
work?
Is your spending
plan helping you
reach goals?
Do you need to
make any
adjustments?
Step 5 - Evaluate
and Make
Adjustments
Step 1 - Track
Current Income and
Expense
Step 4 Implement and
Control
Step 2 Personalize Your
Spending Plan
Step 3 Allocate
Money to
Each Category
© Take Charge Today – August 2013 – Spending Plans – Slide 18
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona
2.2.5.G1
Summary
• A spending plan is an
important financial
planning tool
Step 5 - Evaluate
and Make
Adjustments
Step 1 - Track
Current Income and
Expense
▫ Helps achieve goals
• Make your spending
plan work for you
• Make sure to control,
evaluate, and adjust
your spending plan
Step 4 Implement and
Control
Step 2 Personalize Your
Spending Plan
Step 3 Allocate
Money to
Each Category
© Take Charge Today – August 2013 – Spending Plans – Slide 19
Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences Take Charge America Institute at the University of Arizona