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Financial Responsibility and Money Management: Personal Budgeting

Financial Responsibility and Money Management: Personal Budgeting. Big Ideas Responsible personal finance decisions are based upon reliable information and used to reach personal goals A personal financial plan includes financial goals and a budget. A Budget includes ……?

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Financial Responsibility and Money Management: Personal Budgeting

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  1. Financial Responsibility and Money Management:Personal Budgeting • Big Ideas • Responsible personal finance decisions are based upon reliable information and used to reach personal goals • A personal financial plan includes financial goals and a budget. • A Budget includes ……? • spending on goods and services, savings and investments, insurance and philanthropy

  2. Overview Information • A personal financial plan is designed to enable an individual to reach a goal • What are some goals you may want to save for? • Steps to buy new phone or a car • How to save to pay for college

  3. Financial plans are used for both short range and long range goals • Short-range: goals obtained within a year…Ex’s?.... • Purchasing clothes, tickets, electronics • Taking a vacation • Long-range: goals that take a significant amount of time • Renting apartment , buying car • Saving for college/retirement

  4. Personal financial plan = budget that estimates the income and expenses over a specific period of time • Manages spending • Help achieve financial goals • Usually focus on long-range goals

  5. Budget Categories • Daily, Weekly, Monthly Spending: Ex’s….? • Fixed vs. Variable Expenses….Ex’s? …..

  6. Budget Categories • Investments – maximize savings but involve risks • Stocks, securities, mutual funds • Can be fixed or variable • Insurance – protects personal financial plan • Life, health, auto, home • Pay small amounts to possibly receive a large amount later • Usually Fixed but can VARY and can be PERIODIC

  7. Budget Categories • Philanthropic giving – making donations • Throughout life or after death • Money given to charities/foundations/scholarship funds • Retirement and Estate planning – long term goal • How wealth accumulates over time for use after work/after death

  8. Fixed Costs • Life Ins 60 • College Savings 200 • Car Ins 70 • Car 250 + 280 = 530 • Home Security 90 • Mortgage 600 • Home Ins / Tax 350 • Home Equity Loan 100 • Furniture Loan 90 • Savings 50 • TOTAL $2140

  9. Variable Costs • Natural Gas 80 • Electric 100 • Water Sewer 75 / month (every 3 • Phone (home/cell) 150 • TV/Internet 80 • Gasoline 80 • Babysitter 100 • Church/Charity 70 • TOTAL 735 • Fixed + Variable =2875 + Deductions = 5167

  10. Methods of budgeting • Personal financial worksheet • May be for annual, monthly, or weekly • Tracks income vs. expenditures • Checkbook balancing • Provides a ledger for writing down income vs. expenditures for a particular bank account • Write down cash withdrawals made, debit card use, checks written

  11. Has been largely replaced by online banking and online bank statements • Bank customers can now view their income vs. expenditures almost immediately after making a transaction (if using debit card) • Checks don’t “post” to account until they have been deposited by the receiver

  12. Requires awareness of personal income vs. expenditures • Necessitates financial responsibility • Allows individual to see “trouble areas”

  13. A Budget: So Simple, But So Hard • Why? • Bravery/Courage……(Huh!?!??) • Discipline

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