MONEY MANGEMENT

1. MONEY MANGEMENT Presented by L Everette Martin November 2010

2. Overview • Definitions • Why is Money Management Important? • Goal Setting • Identify Needs versus Wants • Budgeting • Building Your Savings • Managing Your Debt

3. Definitions • Money – any common medium of exchange • Wealth – the total of everything you own that has value • Debt – an obligation to pay or do something • Net Worth – the difference between what you own and what you owe

4. Why is Money Management Important? • Achieve your financial goals • College Education • House • Land • Car • Retirement • Live comfortably within your means • Increase your wealth

5. Goal Setting • Establish Clear Specific Goals • Example - Save $30,000 within 5 years towards college education • State Goals in writing • Segregate goals into short/medium/long term • Short Term – six months to one year • Over one year to five years • Over five years • This may vary according to individual • Target Date • Cost of Your Goal

6. Goal Setting • How much do you need to put aside to achieve your goal per • Weekly/Monthly/Yearly • Establish Milestones • If your goal is to save $30,000 in 5 years, establish annual milestones ($6,000 per year) • Be Practical • Be Flexible • Review and evaluate your goals periodically

7. Identify Your Needs and Wants • Wants • Motorcycle • 50 inch television • 3 cell phones • Needs • Food • Clothing • Shelter • College Education • Medical care

8. Budgeting • Money Management Tool that assists you in achieving your goals • Track your income and spending • Why do personal budgeting fail? • Failure to prioritise spending • Failure to be practical • Failure to plan for the unexpected • Failure to include quarterly or annual expense • Spending more than your income

9. Budgeting • List and prioritise expenses • Expenses – weekly, monthly, quarterly, semi-annual, annual, unexpected • Discretionary versus Non-discretionary spending • Discretionary spending is the money you spend on the things that you could live without but that you won’t (entertainment?) • Failure to budget for discretionary spending can cause your budgeting to fail

10. Budgeting

11. Budgeting • Prioritise Expenses • Top priorities are food, clothing and shelter • Electricity, water • Car loans • Home insurance, medical and vehicle insurance • Credit card payments • Discretionary expenses

12. Budgeting • Income • Salary - $5,000 • Expenses • Rent or mortgage payment $800 • Groceries $200 • Electricity $120 • Water $20 • Insurance $200 • Credit card $100 • Entertainment $100 • Savings $2,000

13. Building Your Savings • Shop with a list and buy only what you need • Plan your shopping trips • Compare prices • Buy groceries at the supermarket that offers most savings • Shop around for banks with the best interest rate on loans • Consider rates on deposits • Use debit card or cash instead of credit card • Turn off lights

14. Building Your Savings • Turn off your computer after use • Cut long distance telephone calls by using available mechanisms such as skype, magic jack etc • Use email or social network instead of calling • Check you cable bill to ascertain if you need all the channels • Balance your check book • Track your spending monthly

15. Managing Your Debt • Track your money • Know how much money you have • Know what your monthly expenses are and what you have left to pay creditors • Save before you borrow • Investigate before you borrow – conduct comparisons of bank loans, credit cards • Have a personal debt management plan • Prioritise your debts • Check with the experts

16. Conclusion • Establish Goals • Identify Needs versus Wants • Budget • Building Your Savings by prioritising your spending • Manage your Debt

17. THE END THANK YOU QUESTIONS?