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Planning a Budget

Planning a Budget. Chapter 31. Standards. Learning Objectives. Students will be able to: Explain how a particular lifestyle can affect your budget. Explain how budgeting can be helpful. Identify the five steps in planning a budget.

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Planning a Budget

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  1. Planning a Budget Chapter 31

  2. Standards

  3. Learning Objectives • Students will be able to: • Explain how a particular lifestyle can affect your budget. • Explain how budgeting can be helpful. • Identify the five steps in planning a budget. • Develop a budget based on goals, income, expenses, and savings. • Compute two kinds of averages –mean and median –that you might use as you plan a budget. • Consider what you want to know . . . • How can you analyze your lifestyle to set priorities as you manage your money? • How can you develop a budget? • What happens if you can’t live according to your budget?

  4. Business Terms • Money Management • Lifestyle • Budget • Gross pay • Deductions • Net pay What do you know about these terms?

  5. Vocabulary • Money Management: • The process of planning how to get the most from your money. • Before you can manage your money you need to set priorities about your spending. • Lifestyle: • An individual’s way of living that reflects that person’s attitudes and values. • Many people know how they want to live, but not as many people try to determine how much it will cost.

  6. What do you spend money on? Lifestyle Costs

  7. Quick Check: • What is it meant by lifestyle? • What is money management and why is it important? Some Things to Consider . . . • Where will you live, and will you rent or own? • What do you prefer in clothing? • What are your tastes in food? • What transportation will you use? • How will you use your leisure time? • What types of vacations do you prefer? • Will there be other lifestyle costs, such as health care and savings for retirement, major purchases, or emergencies?

  8. The Importance of Budgeting • Budget: • A plan for using your money in a way that best meets your wants and needs. • A budget includes the following: • Record of your probable income. • Your planned expenses. • Your planned savings over a certain period of time. • A budget also provides a reference that tells you how well you are managing your money. • A good budget makes you set goals and priorities for spending your money.

  9. Quick Check: • What is a budget? • List two reasons to use a budget? • Why should a budget be flexible? The Importance of Budgeting • Some helpful hints . . . • A budget is a voluntary tool the helps individuals accomplish their financial goals. • Budgets help people control their spending and avoid spending money on items that are not among their highest priorities. • Budgets are tailored to an individual’s or family’s lifestyle –they are designed not to deprive but rather to assist in reaching some financial goals.

  10. Steps in Planning a Budget • Set your goals. • Estimate your income. • Estimate your expenses. • Plan for savings. • Balance and adjust your budget. • Planning a budget is easier if you divide the process into several steps. Follow the five steps listed below as you plan your budget: List five short-term goals someone your age might reasonably set.

  11. Quick Check: • List the five steps of making a budget. Terms Relating to Income • Gross Pay: • The total amount of money you earned for a specific time. • Deductions: • Certain amounts that are subtracted from your pay before you receive your paycheck. • Net Pay: “Take-Home Pay” • Net Pay = Gross Pay – Deductions.

  12. Calculating the Mean & Median • An average is a single number that summarizes a group of numbers. • Mean: • The mean is an average of a series of numbers. • To calculate the mean add up all the items in a series and divide by the number of items. • Median: • Is another type of average. It is the midpoint of a series of items arranged in order. • To calculate the median, list the numbers in order of amount. The middle item on your list is the median • If the number of items is even, the median is the mean of the two middle numbers.

  13. Practice Problems • Six stores charge different prices for jeans: $25.95, $24.50, $27.95, $24.36, $26.00, and 29.95. • What is the mean price? • What is the median price? • Compute the mean and median. $16,545; $14,278; $23,950; $20,772; $14,922; and $14673. • Answers: • Mean: $26.45; Median: $25.98. • Mean: $$17,767; Median: $16,545.

  14. A Sample Budget • Read about Michael and Anita Morales’ budget on pp. 526 - 530. • Make sure to look at all the figures. Be prepared for a class discussion over the reading.

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