Money Management - 101

1. Money Management - 101 Practical Money Skills for Life

2. What a Spending Plan will do for You • Allow you to learn how finances work in your life • Enable you to make good decisions about how you use money • Make you aware of where your money is going • Give you a way to save for specific items • Help you to live within your income- or decide if you need to increase it

3. A Spending Plan will • Show you where to cut spending • Provide methods for keeping good records of spending • Allow you to spend money without feeling guilty • Create a way to measure your progress • Improve communication with other people

4. Step 1: Assess Needs Make a realistic list of needs and wants NeedsWants Food Lots of Money Clothing Cell Phone Housing VCR or Big TV Transportation New Car Child Care Designer Jeans Insurance Vacations Medicines Boat Titan Tickets

5. Step 2: Set Goals Make sure your goals are SMART… Specific- Clearly state what you want to do Measurable- Measure by time and/or money needed Attainable- Make sure your goal is realistic and possible Relevant- Make sure goals fit your needs Time related- Set a definite target day (day/month/ year)

6. Step 3: Make a Plan Put things in Priority Order- Imagine the actions you need to take to get from where you are now to where you want to be. Goals are dreams with deadlines! Post your goals where you will see them frequently. Find a picture to represent your goals. Make them happen.

7. SMART GOAL GOAL: Use cash to purchase a refrigerator in 6 months. New refrigerator will cost $600.00. MUST SAVE FROM EACH PAYCHECK: $100/Paycheck - if paid monthly $50/Paycheck - if paid bi-weekly or semi-monthly $25/Paycheck - if paid weekly

8. Your Planwith Actions • I will save $25.00 from each weekly paycheck for refrigerator. • Steps to Get There: • Pack lunches. • Borrow movies and CD’s from the library. • Shop with a list for everything. • Stay out of Walmart! TARGET DATE: 6 MONTHS

9. PRIORITIZINGGOALS • Build an emergency savings of $_____________. • Put $50.00 from each paycheck for 5 months. • Use OVERTIME or BONUS $$ to build more quickly. • Build a retirement account. • Put $50.00 (automatic deduction) • 401(k) • Roth IRA

10. The money that comes in - INCOME Regular take home income The money that goes out – SPENDING Must know what you are spending to develop a plan for managing your money. Three type of expenses Two Parts of Money Management

11. Making your Money How much money comes in each month? Income has two parts: • Gross income- total you actually earn • Net income (take home pay) - what is left over after your employer takes out deductions for taxes, Social Security, Medicare, and other needs.

12. Three Types of Expenses • Fixed expenses • Flexible (variable or controllable) expenses • Periodic or occasional expenses

13. FIXED / MONTHLY EXPENSES • Car Payments • Rent or Mortgage • Child Care • Cable TV • Car Insurance

14. FLEXIBLE / VARIABLE EXPENSES • Clothing • Food • at home • away from home • Telephone • Utilities • Gasoline

15. FLEXIBLE / VARIABLE EXPENSES (cont).. • Public Transportation • Medical / Dental • Recreation • Supplies • household • personal

16. OCCASIONAL / SEASONAL EXPENSES $500 $100 $600 $800 $0 $200 $0 $200 Car Maintenance / Repairs License Tags Insurance Payments Gifts / Holidays School Taxes Magazine Subscriptions Vacations $2400 / 12 = $200/month

17. Tracking your money Keep and organize the following items to help you keep up with expenses • Check registers • Check stubs and canceled checks • Receipts • Bills and invoices • Credit card statements • Calendars, diaries, pocket notebooks

18. Trimming Expenses • Pack lunch for work or school • Shop for store or generic brands • Use the public library • Choose free recreational activities • Check resale shops or garage sales for bargains • Eat out less often • Handle home maintenance and repairs yourself • Use public transportation when possible • Take advantage of free activities

19. SAVINGS It’s never impossible to save money, no matter how small the amount.

20. Saving Your Money Two types of savings accounts… 1)Emergency fund – provides means for paying for emergencies instead of using credit 2) Nest egg account- helps you reach specific goals such as buying a house or taking a vacation

21. Start the Savings Habit Now! • If you save $20 per week, every week for a year, after one year you will have saved $1,040! • Keep this up and after five years you will save $5,200, not to mention the interest you will earn!

22. WAYS TO SAVE Work average 22 days/month Lunch $8.00/day $176/month Coffee $1.00/day $22/month Soft Drinks $1.00/day $22/month Child’s Lunch $2.00/day $44/month Total $264/month

23. Remember these tips… • Don’t shop on payday • Don’t shop when you’re tired • Don’t shop for food when you’re hungry • Take your time. Try not to shop when you have to hurry • You don’t have to buy it today • Remember, nothing is a bargain unless you need it • Have a spending plan and stick to it • No one can make you buy anything

24. How much debt is too much? Rule of thumb for consumer debt Under 15%=comfortable 15-20%=Caution Over 20%=Danger!!! To figure your debt-to-income ratio: Total average monthly debt payments (excluding mortgage/rent and utilities) $400 Monthly take-home pay $2,000 $400 ÷ $2,000 = .20 = 20%

25. Managing your Money Developing a Personal Spending Plan will show you… • What money is coming in • How much you spend on the basic needs, fixed and variable • How much you need to set aside for periodic or unexpected expenses • How to plan for savings and investing • What is left over for your wants

26. Money Management - 101Get the most from your Money Set Goals Develop a Plan Balance Spending and Saving