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BUDGET

BUDGET. What is it? How do you know if you need one?. Budget. A guide to spending and saving to help people reach their goals…..like a road map for spending. You wonder where the money goes??. You need a budget when. You need a budget when. You fail to have cash set aside for emergencies.

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BUDGET

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  1. BUDGET What is it? How do you know if you need one?

  2. Budget • A guide to spending and saving to help people reach their goals…..like a road map for spending.

  3. You wonder where the money goes?? You need a budget when...

  4. You need a budget when... • You fail to have cash set aside for emergencies

  5. You need a budget when... • You fail to have money set aside to reach your goals.

  6. You need a budget when... • You use credit as a substitute for money

  7. You need a budget when... • You overdraw from your checking account

  8. You need a budget when… • You tend to over estimate income and under estimate expenses.

  9. You need a budget when... • You find it hard to pay expenses, overdue bills.

  10. You need a budget when... • You tend to let tomorrow take care of itself, no future planning.

  11. Budgeting • Budgeting successfully depends on how well you set your financial goals. • Goals should be prioritized and ranked from most important to least important. • The goals you set affect your family, future family, and • community. • The best way to create an effective budget is to establish a filing • system and keep accurate records. • You can use the following to prepare a budget worksheet: word • processor, spreadsheet or data base, or a computer generated • program.

  12. Budgeting • A plan for dividing up your income among spending • and saving options. • Most budgets are based on short term and long term financial goals • First step: Determine your goals • Short Term Goals: Things you hope to achieve in less than 1 year • Long Term Goals: Things you hope to achieve in more than 1 year

  13. Budgeting • Budgets are based on your NET income(pay after deductions) • Gross Income: Total income before deductions Income -Deductions =NET income-Take home pay after deductions

  14. Budgeting: Deductions Required By Federal Law • Federal Income Tax: Acts as a prepayment for the required Federal Tax due every April 15. Internal Revenue Service (IRS) is the government agency responsible for collecting Federal Taxes • FICA-Federal Insurance Contributions Act Social Security is a fund managed by the government in which payroll deductions are required to provide money for disabled workers, dependents of the deceased and retired workers. • Other deductions may be an elective: health, life, savings, union dues, pre-paid taxes

  15. Budgeting • When devising your budget you want to include all possible expenses • Fixed Expenses: Same each month or committed to spend each month: mortgage, rent, loan payments, car insurance, cell/telephone, utilities, charge accounts • Flexible/Variable: Different each month. More choice involved about spending. Food, clothing, recreation, entertainment, dining out

  16. Budgeting Vocabulary • Disposable Income:Money that can be freely spent, not allocated towards any goals • Periodic Expenses: Expenses that come up occasionally • Spendable Income: Amount remaining after deduction taxes and FICA from income

  17. Budgeting • Financial Experts have developed the following “Rule of Thumb” Guidelines for the % of our income we should allocate for each category. To help devise our own personal budgets. This is known as %Goal on our budgets.

  18. Budgeting • Savings-10% • Clothing-purchase/repair 5% • Utilities-electric, water, phone 5% • Health/Personal-medical, grooming 10% • Food-groceries 20% • Housing-rent/mortgage, repairs 30% • Car Expenses-payment, operating costs, repairs 15% • Entertainment-movies, dining out 5%

  19. The Latte Factor • I understand that I could be putting the money from a $4 latte into retirement but I don’t get why it’s important. I would rather have a latte than have $4 when I’m old.

  20. Latte Factor • You walk into a coffee shop on your 25th birthday and plunk down $4 on a latte, that $4 goes away. If you just took that $4 and stuck it under your mattress for 40 years, you’d just have $4 when you’re 65. • But if you took that $4 and put it in an investment that earns 5% (like a treasury note) for 40 years, you would have $28.16

  21. Latte Factor • Okay, let’s say that you drink just one latte a week for just your 25th year on earth. That’s 52 lattes, a total of $208. In that same investment, you would have $1,464.32 when you’re 65.

  22. Latte Factor • Let’s say again that you buy a latte a week until your 65th birthday. That’s 2080 lattes, which costs a total of $8,320 (and that assumes the price will not go up for 40 years, which means it’ll be more than that in reality). With that same investment, you’d have $26,590.67 at age 65.

  23. Latte Factor • Let’s say that you drink three lattes a week (not unreasonable for a latte drinker). That’s 6,240 lattes, which costs a total of $24,960 (again, with no price increase). If you just buy that same 5% investment, you would have $79,772.01 at retirement.

  24. Latte Factor • Now, let’s say instead of buying a treasury note, you put that money in the Vanguard 500, which has earned 12.14% annually since inception in 1976. If we can expect that same return, you will have $558,690.42 at retirement.

  25. Latte Factor • Drink a latte daily? You’re losing $931,150.69 at retirement. A morning latte and an afternoon latte? $1,862,301.38.

  26. This is the power of the “latte factor.” It’s not a single choice to buy a latte that’s powerful, it’s a regular purchase of a latte combined with the power of compound interest that makes it powerful. Obviously, the huge numbers quoted here are indeed in future dollars, but even with 4% annual inflation, you’re still tossing away $387,897 in today’s dollars just on your two lattes a day. That’s the foundation of a good retirement, tossed away on a frivolous part of a daily routine.

  27. What’s your Latte • Food • Movies • Senior lunch • Hobby supplies • Gasoline • Music

  28. Latte • http://www.finishrich.com/free_resources/lattecalculator.php

  29. Latte Activity

  30. Budget Project

  31. MICROSOFT EXCEL • Is a spread sheet with vertical lettered columns. • Horizontal numbered rows • Cells are formed and identified by the corresponding letter & number.

  32. Cells • Can hold alphabetic characters, like words. • Can hold numeric information, or numbers • Can hold a formula that calculates numbers and displays the answer.

  33. Rows Rows (as it relates to a spreadsheet) horizontal division-numbered range of cells words or numbers can be put in.

  34. Columns (As it relates to a spreadsheet) Vertical division -Alphabetic reference to an array of cells -Can hold alphabetic characters like words, numeric information for example, numbers.

  35. Formulas • An equation that performs operations and can refer to different cells. • Must begin with an = sign within the excel program • Total sum function=Σ

  36. Landscape Print: Page Set up-Landscape

  37. Page Set Up-Margins Left and Right margin 0

  38. Gridlines: Page set up-Sheet

  39. Special Notes Columns Width Dollar Signs Landscape Print Gridlines Right and Left Margins Recommended Percents

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