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  • Intro – Welcome – Why is important to understand and practice sound financial management practices?
  • Guaranteed ways to make money – Inherit it – But you cannot pick your parents

UCCSPersonal_Budgeting.ppt UCCSPersonal_Budgeting.ppt Presentation Transcript

  • Lesson Objectives
    • Develop a personal budget for a college student (Homework assignment)
    • Consider credit card use by college students
    • Think about a financial plan for your future
  • College Budgeting 101
    • The primary purpose of a budget is to design a realistic plan for spending limited financial resources.
    • Peer pressure and conveniences such as automatic teller machines can play havoc with student budgets, because ready cash makes it easy to buy things on a whim.
    • A budget puts you in control of the decision to buy or not to buy, based on your needs and available cash.
  • Your Budget … or should we call it Your Spend Plan
    • What are the components?
    • Ultimately, a budget/spend plan helps you learn what is “left over” so you can determine how to spend or save it.
    Known Income = Discretionary $ (Left Over $) - Fixed Costs
  • College Budgeting 101 cont’d.
    • A student budget requires flexibility to adapt to the changing circumstances of college life.
    • Steps in designing a budget:
      • Identify your income sources—can include:
        • Allowance from home; take-home pay from student employment; grants; savings allocated to college expenses; trust fund; gifts; scholarships
  • College Budgeting 101 cont’d.
    • How much money will you spend?
    • Fixed Expenses – constant; exact amounts due on a specific date
      • College room and board; off-campus housing; dormitory meal plan
      • Car payment and insurance (if own a car)
      • Health insurance, if not covered by parent’s plan
      • Tuition
      • Other fixed expenses, such as savings or an emergency fund
  • College Budgeting 101 cont’d.
    • Flexible Expenses - $ spent on wants and needs that are changing in nature
      • Books, lab/equipment fees, supplies, tutoring
      • Groceries, restaurant meals(eating out), snacks, drinks
      • Personal expenses –toiletries, haircuts, laundry
      • Telephone, cable, internet
      • Clothing – new purchases, dry cleaning
      • Social and recreational expenses –movies, sporting events
      • Transportation – plane, taxi, parking, car maintenance
  • College Credit Cards & College Students
    • Your credit record begins when you establish credit in your name, and a history of repayment is recorded by credit reporting agencies.
    • Your credit rating follows you wherever you go.
    • A bad credit rating can affect your ability to get a job or buy a car or a house.
  • “ Bad Debt” vs. “Good Debt” What’s the difference?
    • Name some bad debts
      • Book Definition: “Basically, if you consume it, if it loses value over time, or if you have to feed it, it’s bad debt.”
      • e.g. Credit Cards (living beyond one’s means)
    • Name some good debts
      • “ Returns for a long time”
      • Affordable home, education, transportation/car
        • (6+ year investments)
  • Debt Facts
    • The average American has 2.7 bank credit cards, 3.8 retail credit cards and 1.1 debit cards, for a total of 7.6 cards per cardholder
    • The average amount of credit card debt in households with more than one card is now more than $8,000, according to CardWeb.com
  • Tips for College Students
    • Set a credit limit and stick to it. Always aim to pay off credit card balances each month.
    • If you only pay the minimum balance on credit cards each month, you will pay interest on the use of the money, and it will lengthen the time to pay off the total debt.
    • Your credit limit may increase when you pay your bills on time.
  • More Tips
    • Comparison shop for credit cards. On credit applications, compare the annual percentage rate (APR) including finance charges, methods used to compute charges, the grace period, annual fees, penalties for late payments and other charges.
    • To avoid overspending, make buying decisions based on a careful look at your financial condition, rather than on the credit limit on your card.
  • Ways to make money…
    • Trade time (job skills)
    • Own your own business
  • “ Saving/Investing” vs. “Spending”
    • “ A penny saved is a penny earned.”
    • - Savings
    • -- Emergency fund for a “rainy day” and short term goals
    • - Investing
    • -- Future goals and dreams
    • -- Examples: CDs; 401K; Mutual Funds; Stocks
    • - Need a “spending plan” to figure out how much you can save/invest…
    • MONTHLY GROSS PAY $3,564.00
    • ANNUAL GROSS PAY $42,768.00
  • Taxes, Medicare, Social Security (Must Pays…come out before you even get your money)
    • Taxable income: $3,564.00
    • Uncle Sam’s Portion:
      • Federal Tax: ($535) 15.00% (depends, but likely)
      • MEDICARE/SS ($273) 7.65%
      • CO State Tax: ($160) 4.5%
      • TOTAL: ($968)
    • Net pay after taxes (“Take-Home”) : $2,596
    • Payday (twice a month) : $1,298
    • Annual Net Take-Home Pay: $31,152
    So can you get rich?
  • Maybe we should Develop a Financial Plan for the future to find out… Part II of your Personal Budget/ Financial Plan assignment. Due next class – Sept 14
  • Activity
    • Design a budget for a college student who receives $3,500 from a parent, earns $50 a week from student employment, has a $500 tuition scholarship and will use $1,000 of personal savings. Room and board expenses are $____, tuition expenses are $____ (Use UCCS figures). The student does not own a car and is covered by a parent's health insurance plan.