EMANUEL SAVES! Budgeting 101 January 10, 2011 Sudie A. Fulford Community Learning Center 6:00 p.m.
What is a budget? • A budget is a written record of the money that flows in and out of your household every month. • It is nothing more than the activity of balancing income vs. expenses.
Why budget? • Budgeting is the first step on the road to financial success. • Controlling your day to day finances allows you to do the things you want to do.
How to start? • If you haven’t budgeted before, or feel at this point that you don’t have a good idea of where your money is going . . . • For the next month, write down EVERYTHING you spend money on and anytime you receive money.
Creating a personal budget • What is your income? • Figure out the amount of money you are spending by tracking your expenses. • What are you spending money on that is not a necessity?
FIXED EXPENSES • Fixed expenses – HAVE to have in order to live • A fixed expense is a cost that does not change from period to period or that changes only very slightly. • Fixed expenses are usually paid on a regular basis, such as week to week, month to month, quarter to quarter or year to year.
VARIABLE EXPENSES • Variable expenses change depending on your consumption of a good or service. • A variable expense is a cost that changes significantly from period to period, such as week to week, month to month, quarter to quarter or year to year. • Examples of typical household variable expenses are clothing, groceries, car maintenance and fuel, and utilities such as electricity, gas and water.
Non-Essential Expenses • Clothing, shoes • Books, magazines • Movies • Video Games • Vacations • Sports car • Motorcycle • Boats • Beach house • Other items you want but don’t need
Balancing Income & Expenses • At the end of the month, break everything down into categories. • Is your income greater than your expenses? • YES! – Great, then you can save! • NO! – There’s a problem!
Expenses > Income ? What can you cut out? - Eating out too often? - Impulse buying? - Movie tickets? - Clothing/shoes? - Magazine subscriptions? - Gym membership?
Emotions that drive us to spend money Stress reduction (Shopping Therapy) • Spend money on unnecessary things in an attempt to reduce stress in their lives. • This is counter productive, especially when spending using credit cards. • This results in a cycle of stress as you continue to worry about how you are going to make ends meet. Entitlement • People feel they are entitled to having certain material possessions in their lives. • Entitlement can lead people to spend their hard earned money on items that have no real use or value in their lives besides the pleasure of making the purchase.
Emotions Keeping up with the Jones’ • The need to fit in with or be better than your peers does not end when you leave high school. • Millions of Americans find themselves struggling to maintain a lifestyle that reflects what their neighbors have. • The problem with this mentality is each person and family has their own unique set of financial circumstances.
Ways to Cut Back on Spending Track Where Your Money Goes • A few dollars here and there can add up quickly. • Track your expenses and determine where you are wasting money. • Once you know where you are losing cash you can make the necessary changes to keep that money in your wallet. Stop Using Plastic--Use Cash • Swiping plastic has become incredibly easy. • With both credit cards and debit cards, we can be in and out with a purchase in a matter of seconds. • By using plastic we can begin to lose track of how much money is actually being spent. • Using cash helps you visualize just how much money you’re actually spending.
Give yourself a time out • Before spending money on an item that you are not sure you really need, consider a cooling off period or time out to rethink your purchase. • If you find after a few hours or a few days that you still wish to make the purchase you can do so without wondering if you are making an impulse buy.
NEXT WORKSHOP How to Live Debt Free Thursday, February 23, 6:00 p.m. Sudie A. Fulford Community Learning Center East Georgia College