Budgeting Creating a Plan for Your Spending
$50.00 What would you do if someone gave you $50? Would you spend it on something, would you save it? What would you do?
Vocabulary • Budget: a plan for managing your money during a given period of time • Expense: things you pay for each month with your income • Fixed Expense: expenses that are the same each month (same amount, pay every month) • Variable Expense: expenses that are not the same each month, they fluctuate
What Type of Expense Is It? ***Periodic Expense: expenses that you don’t pay for each month, pay on as needed basis***
P.Y.F. • Pay Yourself First!
Do the Math! • The Simpson family wants to buy a new refrigerator for the kitchen. Mr. Simpson has visited several stores and estimates that it will cost around $700 to buy and install the type of refrigerator the family wants. If their goal is to buy it in six months, how much do they need to save a month?
Do the Math! • The Mencias want to buy their oldest daughter a computer to take to college next year. They’ve shopped around and think they can get a good desktop computer with all the software and a printer for about $1,100. With 15 months to save, how much do they need to set aside a month?
Steps to Create a Budget • Decide time frame for tracking income/expenses • Jackson’s Monthly Budget • Identify your total income Jackson’s Estimated Income: Paycheck (after taxes) $2,100 Interest Earned: $50 Total Income: $2,150
Steps to Create a Budget • Identify all your expenses (fixed or variable) Jackson’s Fixed Expenses Savings (PYF) $500 Car Payment $325 Rent $750 Cable TV/Internet $75 Jackson’s Variable Expenses Utilities $150 Food $200 Gas $100 Jackson’s Periodic Expenses Car Insurance ($300/6mo) $50
Steps to Create a Budget • Do the math (subtract total expenses from income) Jackson’sTotal Expenses $2,150 Total Income $2,150 -Total Expenses $2,150 $0 • Evaluate your budget
Build a Budget Jessica is a Senior in high school. She earns $8 an hour working approximately 25 hours a week at the local grocery store. About 30% of her pay is deducted for taxes. Jessica also earns approximately $15 each month in interest on savings. What is Jessica’s monthly income?
Build a Budget Jessica’s Monthly Expenses Savings: 10% of her income Car payment: $235 Cell Phone: $35-$45 Gas: $40-$60 Auto Insurance: $50 Frequently buys games and music $25-$45 Typically buys her own clothes $30-$50 List Jessica’s monthly expenses, identify if each expense if fixed or variable, estimate cost of variable expenses
Build a Budget • One of Jessica’s short term goals is to take a trip to visit her grandparents right after graduation (in June). She expects this to cost $1,000 and she has already saved $500. Add this expense under her savings category (which already has 10% of her income listed) It is October, Jessica has 8 months to save $500
Build a Budget • Add the fixed expenses together • Total Fixed Expenses: • Add the variable expenses together • Total Variable Expenses: • Add the Fixed and Variable expenses together • Total Expenses: • Subtract Expenses from Total Income • Are we within our limit?