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Spending plans module 16
 

Spending plans module 16

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    Spending plans module 16 Spending plans module 16 Presentation Transcript

    • 1.15.2.G1Spending Plans“Take Charge of Your Finances” Advanced Level
    • 1.15.2.G1Typical Spending Plan Pie Chart Housing 10% Transportation 18% 30% Food Provides guidance when creating a 7% Insurance spending plan Other 20% 15% Saving and Investing What variables may cause these percentages to be different? © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 2 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Having a plan Financial planning - a tool used to achieve financial success based upon the development and implementation of financial goals Spending Plan Development Spending plan - paper or Process electronic document used to record both planned and actual income through expenditures over a period of time © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 3 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Everyone has a uniquespending plan Based upon the following elements:What does theBrown Family value?How will these values affecttheir spending? © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 4 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1SMART Financial Goals Why is goal setting important? © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 5 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Example of SMART goals I plan to save $15.00 from my monthly paycheck for ten months to purchase a new MP3 player for $150.00 Write one SMART financial goal for yourself. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 6 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1SMART goals Evaluate your goal and identify if each component of a SMART goal was included Re-write your goals to be SMART goals Share your goals with your group Complete questions one and two by writing SMART goals for the Brown family. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 7 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Components of a Spending Plan Gumball machine represents components of the financial planning process Income - money earned  Gumballs going into the machine  Wages from a job, allowance, gifts © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 8 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Components of a Spending Plan Expense - money spent Money going out of the gumball machine  Fixed expenses -may have a fixed amount due each month and are contractual  Flexible expenses -can vary each month in the amount owed and are not contractual © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 9 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Spending Plan Activity The following slides will tell you if each item would be income, a fixed expense, or a flexible expense . You may need to refer to those slides at a later point in the module to assist in answering questions. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 10 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Spending Plan Activity Paying Rent Fixed expense Wages Income © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 11 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Spending Plan Activity Groceries Flexible expense Internet bill Fixed expense © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 12 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Spending Plan Activity Tips Income or Flexible Expense Utilities Fixed expense © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 13 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Spending Plan Activity Gift from family Income Savings Fixed expense or Income © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 14 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Spending Plan Activity Automobile registration Fixed expense Eating out/Snacks Flexible expense © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 15 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Spending Plan Activity Scholarships Income Hobbies Flexible expense © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 16 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1How to Develop and Maintain aSpending Plan Steps 1-3 help develop a spending plan Steps 4-5 help maintain a spending Spending Plan plan Development  Evaluate and adjust to Process meet personal needs and adapt to life changes © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 17 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Step 1: Track Current Incomeand Expenses Necessary to creating a realistic spending plan © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 18 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Tracking Methods Carrying a small notebook and writing down all expenses Keep all receipts Use a debit card if your depository institution creates spending reports for your account Input information into a cell phone Cell phone applications Must work for the individual! There is not one right method! © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 19 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1The Costs Add Up Weekly date night at  Eating lunch out 5 days the movies with per week popcorn  $5-$10 daily  $30 per week  $1,300-$2,600 per year  $1,560 per year  Daily sport drink Daily Latte  $2.00 daily  $3.75 every day  $730 per year  $1,369 per year © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 20 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Gross vs. Net Income © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 21 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Payroll Deductions Taxes  Required by local, state, and federal governments  Provide public goods and services  Account for approximately 30% of an individual’s gross income What are two items or services you use that are paid for by taxes? Payroll deductions:  Federal Taxes (mandatory)  State Taxes (If applicable)  Federal Insurance Contribution Act (FICA tax) (mandatory)  Retirement (depends upon the employer)  Health care benefits (depends upon the employer) © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 22 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Saving and Investing Savings- Current income not spent on consumption Pay Yourself First!  Save then spend Recommend saving 10-20 % of net income Save at least 6 months worth of expenses for emergencies Continue to invest © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 23 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Housing -Typically 30% of net income Possible expenses associated with housing:  Monthly payment – a fee charged each month to live in a home  Utilities – includes electricity, water, and garbage fees  Home or renters insurance – purchased to protect the home and possessions inside from loss  Property taxes – paid by the owner of the home  Maintenance – Repairs, cleaning, and care  Household furnishings - furniture, decorations, etc. © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 24 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Transportation-Typically 20% of net income Possible expenses associated with transportation:  Monthly payment – if a loan is taken out to purchase an automobile  License and registration – required by law to own an automobile  Insurance – required by law to protect the vehicle and individuals if involved in an accident  Repairs and maintenance  Fuel  Public transportation fees – including bus, metro pass, taxis, or parking fees © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 25 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Food-Typically 15% of net income Possible expenses associated with food:  Food at the grocery store  Meals at restaurants  Snacks eaten out (coffees, treats)  Party and entertainment foods  Non-food kitchen supplies (plastic wrap, dish soap) © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 26 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Insurance-Typically 7% of net income Arrangement between an individual and an insurance company to protect the individual against risk Health – pays a portion of health care Home/renters Automobile expenses if one is sick or injured Life – provides Disability – provides financial support to an financial support if an individual’s individual is injured beneficiaries upon and cannot work death © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 27 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Other Expenses-Typically 18% of net income Communication and Medical costs computers (Internet, cell phone, cable not covered by Clothing television) insurance EducationalPersonal care Pet care Entertainment expenses Gifts and Credit costs charitable (loan payments) contributions © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 28 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Step 2: Create Personalized Income andExpenses Categories Categories are based upon the individuals/families income and expenses Reference tracking from Step One © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 29 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Step 3: Allocate Money to EachCategory Use categories created in Step Two Reference tracking from Step OneRefer to goals and determine if any changes in spending needs to be made A spending plan is now developed! © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 30 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Spending Plan Template Everyone uses a different program to create a spending plan  Paper and pencil  Online software  Electronic programs such as Microsoft Excel and Word Must be something that an individual can manage effectively © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 31 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Spending Plan TemplateIncome AmountWages $Total Income $Expenses Amount Percentage of income used for each expenditureHousing $ Rent or mortgage Utilities Maintenance InsuranceFood $ Eating out GroceriesTotal Expenses $Total Income – Total Expenses $ © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 32 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Net Gain or Net Loss? Net gain - there is remaining money to either save, spend or invest Net loss - an individual is spending more money that he/she is earning and has to use credit (borrowed money) to meet their financial obligations A spending plan should have income and expense matching one another (reach zero) © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 33 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Step 4: Implement andControl Implement:  Put plan into action! Control:  Determine what was actually spent  Continued monitoring of spending allows an individual to know if they are spending too much in a category  Helps avoid credit and savings use  Utilize control systems © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 34 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Control Systems Envelope systems – place the actual budget amount of cash from a paycheck into a specific envelope system for the expense Check register system –track all expenditures in a checkbook register which has been divided into spending plan categories Electronic spending plan systems – Multiple types of software are available  Cell Phone Applications © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 35 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Step 5: Evaluate and MakeAdjustments Assess if spending plan is working  Are goals being met?  Are the dollar amount allocations in each category accurate?  Is money being saved or invested?  Is credit being used? If so, then the spending plan needs to be adjusted (by increasing income or decreasing expenses) Make changes to spending plan if necessary Begin the process again! © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 36 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1WHAT IS THE LONG-TERM POSITIVEIMPACT OF A SPENDING PLAN?To know where your money is going!To build long-term wealth!To create long-term financial security! © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 37 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Net Worth Statement Net worth statement - describes an individual or family’s overall financial condition on a specified date The components include:  Assets – Everything a person owns with monetary value  Liabilities – Debts or what is owed to others  Net Worth – the amount of money left when liabilities are subtracted from assets (indicates wealth) © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 38 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1Who is Wealthier?Juanita – earns $35,000 per year Alexis – earns $100,000 per yearAssets Assets Home $75,000Home $60,000 Retirement $35,000Retirement $24,000 Automobile $8,000Automobile $8,000 Total Assets $118,000 Total Assets $92,000 LiabilitiesLiabilities College loan $10,000College loan $6,000 Automobile loan $4,000 Credit card debt $20,000Mortgage $35,000 Mortgage $65,000 Total Liabilities $41,000 Total Liabilities $99,000 Net Worth $51,000 Net Worth $19,000 © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 39 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona
    • 1.15.2.G1 Gumball Analogy Always have more money coming in than out! Work towards building wealth! Income (money in) Net Worth (wealth) Flexible Expenses (money out) Fixed Expenses (money out) © Family Economics & Financial Education – Updated May 2011 – Spending Plan Unit – Spending Plans – Slide 40 Funded by a grant from Take Charge America, Inc. to the Norton School of Family and Consumer Sciences at the University of Arizona