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Unit 2 Budgeting

Unit 2 Budgeting. Making the Most of Your Money. Examine spending habits. How does your spending measure up? Spending Plan / Budget A plan for managing your money during a given period of time. Will change as your income grows. SMART SPENDING. Spending a $1 a day on a bottle of water

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Unit 2 Budgeting

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  1. Unit 2Budgeting Making the Most of Your Money

  2. Examine spending habits • How does your spending measure up? • Spending Plan / Budget • A plan for managing your money during a given period of time. • Will change as your income grows.

  3. SMART SPENDING • Spending a $1 a day on a bottle of water • In one month—you would have spent $30 VERSUS • Spending $30 on something you really need or want

  4. Part 1 - INCOME • Cash Flow- refers to the money you have coming in, as well as the money you have going out • Income-any money you receive • Allowance • Birthday $ • Working a job

  5. Paycheck Income • Paycheck will be for less than the money you actually earned. • WHY? • Payroll Deductions- items that you must pay for and that your employer must withhold from you • Taxes • Insurance

  6. Taxes • Fees that support government programs and are required by law to be applied to income, property, or goods.

  7. What do our taxes pay for? • Public Schools • Military • Road Maintenance • Retirement Income -Elderly

  8. 4 Most Common Tax Deductions • Federal Income Tax • State Income Tax • Social Security Tax • Medicare Tax

  9. Federal Income Tax- a fee collected by the federal government to support its programs- sent to the Internal Revenue Service (IRS)

  10. State Income Tax Most states collect an income tax that helps pay for state services. Also collected by every employer on behalf of its employees and then sent to the state.

  11. Social Security Tax • Provides a small income and other services to the elderly, disabled Americans, and orphaned minors.

  12. Medicare Tax • Provides medical insurance also to the elderly and to some disabled Americans.

  13. What you earn? versus What you actually get a check for?

  14. Gross Income • The total Amount of income from your wages • Before any Payroll Deductions • # of hours you work time your hourly rate • Ex. If you work 15 hours a week and get paid $10 an hour-your gross income would be $150 for the week

  15. Net Income / Take home pay • The amount you’ll be able to deposit or cash. • The amount the check is written to you for.

  16. Expenses • What you spend money on • Needs and Wants

  17. Expenses • 1. Fixed • 2. Variable • 3. Periodic or Occasional

  18. Fixed Expenses • Cost the same amount every time • Home Loan (Mortgage) • Car Loan • Example- $250 every month to pay off a car loan

  19. Variable Expenses • Fluctuate in amount, so you usually have more control over how much they will be. • Food / Groceries • Entertainment

  20. Most Important Expense • P.Y.F. Pay Yourself First

  21. Pay yourself first • Saving is an important part of reaching your financial goals. • Whenever you receive $, you should immediately put aside a certain amount into an account that you will use later to reach a long-term financial goal.

  22. Creating a Budget • 1. Decide the time frame for tracking your income and expenses. Weekly or Monthly? • 2. List all the money you have coming in. Then total your income. • 3. Make categories for each of your expenses. Don’t forget P.Y.F. Then total your expenses.

  23. Creating A Budget • 4. Subtract your total expenses from your total income. If the # is negative—you must adjust your expenses. If the # is positive, you might want to add more to P.Y.F.

  24. Creating a Budget • 5. Step back and look at your budget and your financial plan. • Does it need tweaking?

  25. Stay on Track

  26. Documents associated with earnings/income • W-4 • Pay stubs • W-2

  27. W-4 It is almost impossible to avoid paying any taxes. You do have some control over the amount taken out of your paycheck. The federal gov’t calculates your tax decutions from the information on the Form W-4. W-4 form is filled out when you started your job.

  28. Sample Form W-4

  29. Form W-4 ..continued • Key part of W-4 is on line 5 where you fill in the total number of “allowances”. • These allowances determine how much tax will be withheld from each paycheck. • Examples • Martial Status • # of children

  30. Documents– pay stubs Pay stub- portion of paper that is attached to your actual paycheck. Double check your stub when you receive it.

  31. Sample Pay Stub

  32. Documents –W-2 Form When you receive your last pay stub for the year- double check it against your W-2 that you will receive from your employer in January. The information should match! If it does not match, ask your employer for a corrected W-2 form.

  33. Sample W-2 Form

  34. Summary • 3 types of documents associated with our earnings/income • W-4 • Pay Stubs • W-2 • QUESTIONS????

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