Unit 2a Budgets


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Unit 2a Budgets

  1. 1. GENC3003Personal Financial Planning<br />Andrew Hingstonandrew.hingston@unsw.edu.au<br />Unit 2: Budgets<br />
  2. 2. 2<br />What is a budget?<br />It is a plan for your money over the next year:<br />Income from working, parents, youth allowance<br />Expenses from …<br />Income – Expenses = Savings (or Dis-saving if negative!)<br />It is forward looking (over next year)<br />But future is uncertain …<br />So actual income and expenses will be different<br />Budget is a “best guess”<br />Usually best to have “average monthly” and “total yearly”<br />
  3. 3. 3<br />What does a simple budget look like?Budget for 200X<br />
  4. 4. 4<br />Why have a budget?<br />Knowledge of your finances = power over them<br />Know where our money comes from (income)<br />Know where the money is going (expenses)<br />Identify areas of over-spending to cut back<br />… which will find extra money to save<br />Helps us to be disciplined with our money<br />
  5. 5. 5<br />Discussion<br />What do difficulties do you think people have when making a budget?<br />What difficulties do they have sticking to budgets?<br />
  6. 6. 6<br />Regularly tracking expenses<br />Track all income and expenses for two months<br />… before making your first budget<br />= much more accurate budget!<br />Then track expenses after making budget<br />… to see whether you are sticking to budget<br />
  7. 7. 7<br />What are some tips?<br />Make tracking expenses easy as possible<br />Use software (Quicken or Money or other)<br />Make habit of collecting receipts<br />Use eftpos and download transactions from website<br />Be realistic with your budget<br />Allocate enough money for having some fun<br />Be flexible – the future is uncertain<br />Add “miscellaneous” – preferably 10% of total expenses<br />Aim to always save at least 5% of your income<br />If you can’t, then get a casual job or cut back in expenses<br />
  8. 8. 8<br />Expense tracking methods<br />Extreme tracking<br />Track every dollar, every month (using software)<br />Best method but some people can’t keep it up!<br />Electronic tracking<br />Track all eftpos transactions + total changes in cash<br />Good but where is all the cash being spent?<br />
  9. 9. 9<br />Audit tracking<br />Track every dollar for only two months a year<br />Good but what if they are not representative of the other months?<br />Fixed savings tracking<br />$X per month is withdrawn from transaction into savings account<br />You are free to “spend” the rest<br />Controls total expenses but where is it all going?<br />Match method to personality type<br />It must be sustainable over the long-term!<br />
  10. 10. 10<br />Expense tracking assignment<br />See course outline for detailed information<br />Track all income & expenses<br />Using spreadsheet provided at website<br />Submit spreadsheet on website at checkpoints<br />Read course outline for instructions on tricky issues<br />Irregular and large bills and expenses<br />Irregular income and holiday work<br />Special instructions for people living with their family<br />
  11. 11. 11<br />Tips for recording expenses<br />Ask for receipts whenever you buy something.<br />Update your spreadsheet each day<br />Use “Task scheduler” to make it open at 8pm each day<br />Count cash at start of week<br />Count cash one week later<br />Note ATM withdrawals and expenses<br />Reconcile change in cash vs expenses<br />Missed something? Put as “miscellaneous”<br />
  12. 12. Stop and read<br />Now read:<br />Chapter 2<br />Your Budget<br />12<br />