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I.How do plan for the future.

Financial Planning, Budgeting, and Taxes Objective: Make financial plans and balance a personal budget. I.How do plan for the future. A Budget makes sure you have enough money to spend and save allows you to see where your money is being spent

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I.How do plan for the future.

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  1. Financial Planning, Budgeting, and TaxesObjective: Make financial plans and balance a personal budget.

  2. I.How do plan for the future. • A Budget • makes sure you have enough money to spend and save • allows you to see where your money is being spent • it helps you make sure your income matches your expenses • Income: The money you make from a job, or investments i.e dividends, bonuses, capital gains, interest on savings • Expenses: Money paid out of your income. • Fixed expenses: tend to be the same each month. Ex. Rent or mortgage, phone plan, loan payment, car payment. • Variable expenses: tend to fluctuate each month. Ex. Clothing, groceries, entertainment, utilities.

  3. II. Credit Cards • A. Credit Cards: are forms of payment on credit • buy now and pay later • Managed properly, credit cards offer us • convenience, • sense of security • build a healthy credit history • Irresponsibly used credit cards: • result in excessive debt • become a long-term liability • hinders your ability to get a loan for bigger purchases like a home or car • B. Debit Card: looks like a credit card, but is linked to a checking or savings account • Funds are withdrawn immediately from the account with each purchase

  4. C. Credit Card Fees • credit cards charge fees for their usage • Annual Fee • Annual Percentage Rate (APR) • Finance Charge • Late Fee • Minimum Monthly Payment • Monthly Periodic Rate • Transaction Fee

  5. Calculating Simple Interest • Interest: The amount of money that you pay to borrow money or the amount of money that you earn on a deposit • Annual Interest Rate: The percent of interest that you pay for money borrowed, or earn for money deposited • Simple interest formula: I = Prt • I is the interest earned • P is the principal or the amount of money that you start out with • r is the annual interest rate • 4.5% interest is represent as .045 • t is the time in years • represent as a decimal 9 months =.075 • Balance: The sum of the principal (P) & the interest (Prt)

  6. Example • Dianna deposits $725 into a savings account that pays 2.3% simple annual interest. How much interest will Dianna earn after 18 months? Solution • 2.3% rate of interest will be expressed as .023 • In the simple interest formula, time is measured in years. Write 18 months as 18 12 or 1.5 years. • I = Prt Use the formula for simple interest. • Substitute $725 for P, 0.023 for r, and 1.5 for t. • I = (725)(0.023)(1.5) • I = $25.01

  7. Finding the Balance on an account • Use the formula: A = P + Prt • A represents the sum of the principal (P) and the interest earned (Prt) • Example • Belinda deposits $550 in an account that pays 3.7% simple annual interest. If she keeps the money in the account for 2 years, how much will Belinda have in her account after 2 years? • Solution • (550) (2) (.037) =40.7 + 550 = $ 590.7

  8. Classroom Activity • Complete the Calculating Interest & Balance wkst • Complete the Budget Blast activity packet

  9. III. Taxes • A. Types of Taxes on income • 1. Estate Tax: tax paid on inheritance • 2. Income Tax: tax paid on salary from job. • 3. Capital Gains Tax: tax on gains (money made over and above the original selling price) made from selling stocks, land, or other investments • B. Tax Credits • credits reduce the amount of tax you are liable for • Examples 1. The Child and Dependent Care Credit 2. The Lifetime Learning Credit 3. Earned income credit

  10. IV: Filing Taxes • A: The 1040 is the form a taxpayer fills out to file for a tax refund or to pay taxes • paid too much to the government, you receive a tax refund • paid too little then, you owe money to the federal or state government • B: Recommended records to file taxes • Proof of identification • Social Security numbers for you, your spouse, and dependents ( children, elderly parents you care for) • Wages and earnings statements: Form W-2, 1099 • Interest and dividends statements from banks & brokerages • A copy of last year’s tax return • Bank routing and account numbers • Receipts for charitable donations

  11. Homework due ___________ • Go to the following website http://www.1040.com/federal-taxes/filing-basics/ • Read Tax Return Filing Basics. Answer the following question and discuss with a partner. • 1. What are the two ways to file a tax return? • 2. What can you do if you cannot afford to hire someone to do it for you? • 3. What form of identification do you need to claim your spouse and children?

  12. EDUCATION AND EARNING POWER • Assignment 2: Take a look on page 526 of your textbook. • Analyze the chart. • 1. What are the median incomes for men and women who are employed full time? • 2. What is the difference in median income between female high school graduates and females who attain bachelor’s degrees? • 3. Is the unemployment rate greater for worker’s with only a high school diploma? Why? • 4. What is underemployment? How is it different from unemployment?

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